Policies: Incentives

The Federal Wind Energy Production Tax Credit: How will it affect the wind industry's development in the coming years?

Published June 2013
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The essentials

  • In January of 2013, U.S. Congress approved a one year extension of the Production Tax Credit (PTC) for Wind Power in the American Taxpayer Relief Act, as a part of the “fiscal cliff” budget negotiations. The Wind Power PTC currently expires on January 1, 2014.
  • The PTC provides temporary support for the development of wind power by providing a 2.2cents/kWh subsidy for wind power produced over the wind farm’s first 10 years of operation, starting when construction begins.
  • Wind facility construction must begin before January 1, 2014 in order to qualify. Residential wind power production is exempt from the tax credit.
  • Of all new generating capacity installed from 2007-2011, 35% was wind power.  In 2012, the percentage grew to 44%. (AWEA).

Solar Phoenix 1 & 2: Solar Rooftop Financing

Published May 2013
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The essentials

  • Solar Phoenix 1 & 2 are a series of city-sponsored residential solar financing programs.
  • The Solar Phoenix program is a federally-recognized public-private partnership that allows Phoenix home owners to finance solar panels through leasing at low or no upfront costs.
  • The National Bank of Arizona funded both Solar Phoenix 1 & 2 with $25 million to initiate the program. The City of Phoenix partnered with Solar City for the first iteration and currently partners with Paramount Solar to provide panels, installation services, and maintenance.
  • The leased solar panels are expected to generate sixty to eighty percent of a residence’s power demand.

APS & TEP 2013 REST Distributed Generation Incentives

Published February 2013
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The essentials

  • On January 23, 2013, the newly-elected Arizona Corporation Commission (ACC) unanimously voted to end all photovoltaic (PV) rooftop incentives for commercial/non-residential entities for both APS and TEP.
  • They also voted unanimously to reduce APS’s combined residential photovoltaic (PV) rooftop and solar water heater (SWH) incentives to $4.48 million. TEP’s combined residential PV rooftop and SWH incentives budget was set at $744,486. Commissioner Pierce stated 2013 will likely be the last year that regulated utilities will offer residential incentives.
  • The ACC stated incentives are no longer necessary to continue the commercial solar distributed generation markets. The Solar Energy Industries Association predicts a serious market contraction in the wake of the Commission’s decision.

APS's Track and Record Proposal for Renewable Energy Credit Compliance

Published February 2013
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The essentials

  • In its 2013 REST implementation plan submitted to the Arizona Corporation Commission, Arizona Public Service (APS) proposed eliminating all incentives for distributed generation (DG) renewable energy systems.
  • Under the REST, regulated utilities such as APS are required to obtain a certain amount of Renewable Energy Credits (RECs). One REC is created for every kilowatt hour generated, and is the property of the owner of the distributed generation system.
  • APS currently purchases its RECs by offering cash incentives to DG owners. Without incentives, APS will be unable to obtain the required amount of RECs.
  • APS proposes severing the relationship between generation of energy and ownership of RECs. Instead, APS proposes demonstrating compliance with the REST by tracking and recording all distributed energy production that is interconnected within its service territory.
  • Critics argue this would violate the REST and constitute a government taking of private property.

AZ tax incentives supporting links in the clean energy supply chain

Published March 2012
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The essentials

  • The Arizona state tax code supports the manufacturing and retail links in the state’s renewable energy supply chain.
  • A business income tax credit and a decreased property tax valuation encourage renewable energy product manufacturers to invest at least $25 million in headquarters and/or manufacturing facilities in Arizona.
  • Solar and wind energy retail sales and installations are encouraged by exempting such transactions from the transaction privilege tax, thus allowing for possible lower retail costs for consumers.

Arizona State Tax Incentives Encouraging Electricity Generation from Renewable Energy Sources & Impacting Renewable Energy Demand

Published March 2012
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The essentials

  • The Arizona state tax code provides incentives for the generation of electricity from utilities, corporations and residences.
  • These incentives are in the form of two property tax valuation adjustment policies and three tax credits
  • In addition, the code encourages a decrease in overall electricity demand by encouraging adoption of energy efficiency measures such as passive solar systems, insulation, and double-pane windows.

Algaculture Policy in Arizona

Published March 2012
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The essentials

  • Algaculture is the farming of algae to convert into biofuel or food products.
  • Algae are microscopic plants that use the natural photosynthesis process to create biomass, from which oil can be extracted.
  • AZ recently passed 2 algaculture laws that support the potential growth and advancement of the algaculture biofuel industry in the state.
  • As of July 2012, Congress is considering a provision in the 2013 U.S. defense budget that would prohibit the military from buying and using biofuels if costs are greater than costs for fossil fuels. This provision could hinder growth of the biofuel industry in AZ.

Decoupling

Published March 2012
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The essentials

  • Energy efficiency may bring benefits such as less cost to consumers, fewer future rate increases, and less environment impact for energy consumption.
  • However utilities have a disincentive to invest in energy efficiency measures that reduce sales and therefore profitability.
  • A critical step for successful energy efficiency policy is a mechanism that severs the link between utility revenue and total energy sales.
  • The Arizona Corporation Commission has pursued such “decoupling” measures in several recent rate cases.