Clean Electricity Investment Tax Credit
The 5 Ways Your Company Will Save with Solar: Clean Electricity Investment Tax Credit
As businesses seek to embrace sustainability and reduce their environmental footprint, solar energy has emerged as a viable solution for generating clean electricity. In addition to the environmental benefits, there are several ways that businesses can save financially by investing in solar. Moreover, with the introduction of the Clean Electricity Investment Tax Credit in Canada, businesses have an added incentive to adopt solar technology. This tax credit, along with other benefits such as reduced electricity costs, depreciation allowances, and carbon credit generation, makes solar an attractive investment for businesses aiming to save money and contribute to a sustainable energy future.
NON TAXABLE ENTITIES ONLY-Clean Electricity Investment Tax Credit
A newly announced, refundable 15% tax credit on the capital costs of investments made by non-taxable entities, such as Indigenous communities, municipally owned utilities and Crown corporations that make investments in renewable energy, energy storage and inter-provincial transmission and other non-emitting electricity infrastructure.
By taking advantage of this tax credit, businesses can further reduce their upfront costs and enhance the financial viability of their solar investments. This incentive not only aligns with the government’s commitment to clean energy but also helps businesses achieve their financial and sustainability goals simultaneously.
TAXABLE ENTITIES ONLY- Clean Technology Investment Tax Credit
A refundable 30% tax credit on capital cost of investments made by taxable entities in wind, solar PV and energy-storage technologies. This Credit will be available to all project spending starting today, March 28, 2023, though to 2034.
Significantly Reduce the Cost of Electricity
One of the primary advantages of solar energy is its ability to offset the cost of electricity. By installing solar panels on-site, businesses can generate their own electricity and reduce their reliance on purchasing it from the local distribution company. This translates into substantial savings on monthly utility bills, providing a tangible return on investment over time. Moreover, combining solar with battery storage allows businesses to further optimize their energy usage, protecting against blackouts and reducing reliance on carbon-emitting generators during peak demand periods.
The Declining Balance Method
In Ontario, businesses can take advantage of the declining balance method for calculating the depreciation expense of their solar systems over their useful life. Under this method, the depreciation expense is calculated as a fixed percentage of the system’s declining book value. In the case of Class 43.1 and 43.2 solar systems, the capital cost allowance (CCA) rate is set at 30% in Ontario.
By utilizing the declining balance method, businesses can accelerate the depreciation expense of their solar systems in the earlier years of their life. This effectively reduces the tax burden and enables a faster return on investment. This depreciation benefit further enhances the financial viability of solar investments, making them more attractive for businesses.
Carbon Credits Generation
Businesses in Ontario can generate carbon credits by implementing emission reduction projects, including solar installations, that meet the Ontario Emissions Performance Standards (ERS). Once a project is registered, the Ontario government issues carbon credits based on the verified emissions reductions achieved through the project.
These carbon credits can be monetized by selling them on the carbon market, creating an additional revenue stream for businesses. Alternatively, businesses can use the carbon credits to meet compliance requirements under the regulatory carbon pricing program. This provides an opportunity to offset the costs associated with carbon pricing while further demonstrating the commitment to sustainability.
Solar energy presents businesses with a compelling opportunity to save money while embracing sustainability. The Clean Electricity Investment Tax Credit, combined with the advantages of reduced electricity costs, depreciation allowances, and carbon credit generation, provides businesses with strong incentives to invest in solar technology. By leveraging these benefits, businesses can not only lower their operational expenses but also contribute to a greener and more sustainable energy future. As solar technology continues to advance and government support for clean energy grows, now is an opportune time for businesses to explore the financial and environmental advantages of solar energy. Learn more about going solar commercially on our website: Commercial Solar or visit our helpful compiled list below.
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