In the Market for Energy Efficiency: Responding to Rising Energy Rates
December 4, 2014
The business case for energy efficiency is growing stronger. With energy prices in New England this winter projected to be the highest they have ever been, it is important for businesses to continue to explore new and innovative ways to reduce and conserve energy while staying on top of market trends and ahead of potential savings opportunities. So, what factors are influencing the energy markets and how can businesses maximize savings in the face of high energy prices? Last month, at the Challenge Monthly Meeting, Bruce Buckbee of World Energy, an energy management services firm, discussed the impending high energy prices and the implications demand and fuel sources have on New England energy markets. In his presentation, he identified the key reasons attributed to the surge in rates: -In New England, about 60% of electricity is generated from natural gas. Over the past three years, there has been a substantial increase in residential customers switching from heating oil to natural gas. Because residential customers get distribution priority on the pipeline in the winter, electricity generators are forced to switch to their backup fuel, oil, which is more expensive and leads to a rise in wholesale electricity prices. -Overall increases in energy demand, on both a regional and national level, are affecting local energy rates. Due to limited pipeline infrastructure in New England, the demand exceeds the available supply and prices increase to account for these inefficiencies. -Looking to the long-term implications, the new capacity zones, scheduled to be introduced in 2016 in New England, will divide the singular zone of New England into four separate capacity zones: Northeast, Massachusetts, Connecticut, Maine and the rest of New England. The nearly doubled capacity costs in the new Northeast zone are projected to drive up prices to account for the increase in demand. While other factors could lead to the rise or fall in energy rates, businesses and institutions benefit from implementing energy efficiency projects year-round. ISO New England reports annual New England state investments in energy efficiency programs are projected to grow from $500–600 million to approximately $800 million. As volatile as energy markets have and will continue to be, a strong case can be made for taking action on conservation and efficiency projects with the potential for higher savings and shorter payback periods. To further improve the return on commercial energy efficiency investments, Massachusetts has the following renewable energy and efficiency incentives available: State excise tax deduction for solar or wind powered climatic control or water heating units Eligibility: taxpaying corporations -Tax deduction in the amount of 100% of the cost used exclusively in a trade or business. -Costs include installation costs & wages for personnel to operate the unit. -No expiration State property tax exemption for renewable energy property Eligibility: taxpayer owners -Tax exemption in the amount of 100% of the tax on wind or solar energy systems -Hydropower facilities are also exempt from property tax for 20 years -Owner of system has agreed to pay (in lieu of taxes) at least 5% of its gross income in the preceding calendar year to their city or town. -No expiration State Income tax deduction for energy conservation or alternative energy patents Eligibility: taxpayer corporations -Tax deduction in the amount of 100% of income received from the sale or lease of a U.S. patent beneficial for energy conservation or alternative energy development and any income received from the sale or lease of property subject to the approved patent. -Patent must be certified as beneficial for energy conservation or alternative energy development by the MA Department of Energy Resources. -Tax deduction period: 5 years from the patent approval date. State sales tax exemption for cellulosic biofuel Eligibility: Taxpayer purchases of cellulosic biofuel -Sales tax exemption in the amount up to $0.21 per gallon -Proportional tax exemption available for fuel containing a percentage of cellulosic biofuel. -Expires December 31, 2017 View all renewable energy and efficiency state tax incentives here: Green Tax Incentive Compendium: Federal and State Tax Incentives for Renewable Energy and Energy Efficiency - Jerome L. Garciano, Esq., CPA, Robinson + Cole (July 2014)
