Sustainable, or “green,” construction practices have gone from fringe movement to mainstream. A significant part of these practices, as reflected in the LEED rating system, concern energy conservation and efficiency. However, concerns still exist in the contractor and developer community regarding the costs of sustainable energy building practices and whether there is a “green premium” in using those methods. While there is a general awareness in the construction community that some incentives exist for certain types of energy efficient buildings, most notably those promulgated by the American Recovery and Reinvestment Act of 2009, or “Stimulus Act,” it is important to understand the breadth and depth of such programs. In fact, financial incentives for green energy projects exist in nearly every state and in numerous forms – available for both commercial and residential projects of nearly every size.
The most prevalent programs are personal and corporate tax credits for the installation of energy efficient or renewable energy systems. As of 2010, the federal government and 46 of the 50 states had some form of personal and corporate tax credits for renewable energy. Of those, most have multiple credits and programs that touch on nearly every type of energy efficient construction and system. In many cases, these credits will recoup a significant part of the expenditures required to construct or install the system.
In addition, the federal government and nearly every state have direct grant or loan programs, where a government entity provides funding for some portion of the cost of renewable or energy efficient projects. For example, the federal government’s Renewable Energy Grants, available to qualified commercial, industrial, or agricultural projects, provide a grant for up to 30% of the construction cost of a wide variety of efficiency projects, such as solar, wind, hydroelectric, municipal solid waste, and geothermal projects.
Another example of direct funding is one of the most recent green incentive innovations: PACE, or Property-Assessed Clean Energy. Nineteen states – including Georgia, Virginia, North Carolina, and Florida – enacted some form of PACE legislation between 2008 and 2010. In general, PACE allows qualifying industrial, commercial, or residential property owners to borrow money from a governmental entity for the construction or installation of a qualifying energy efficiency measure. The loan is then repayed over time by a special property tax assessment based upon the increased value of the property.
Taken together, there are literally hundreds of programs across the local, state, and federal level that provide some financial incentive for green energy projects. The impact of these incentives on a project’s construction-cost bottom line can be significant and it therefore pays – literally – for developers and contractors to thoroughly research programs that may apply to a particular project.
Stites & Harbison’s Construction Service Group and Green Law Practice Group, which include attorneys with industry experience and LEED Accredited professionals, have the knowledge to assist you with these issues.