The Solar Industry has changed tremendously since it first came on the scene in the 1970’s. As with any mature industry the technology has improved and cost have dropped by 90%!
Over the past decade, the amount of residential solar has risen exponentially while both commercial and industrial property owners have been slower to adopt even with a generous federal tax credit that will offset the installation cost. Thesolar investment tax creditallows investors in solar energy systems to claim up to 30 percent of their solar installation costs as a credit on their taxes. In December of 2015, the program was extended by five years in order to spur the growth of commercial and industrial solar projects. If we looked at both commercial and residential rooftop solar solutions there is enough suitable, sunny rooftops in the U.S. to provide nearly 20% of the power in every state.
In my home state of Minnesota, we have approximately 282 million square feet of public building rooftops. If we were to place solar arrays on the roof tops of just our K-12 public school buildings, we could create enough to power to satisfy the needs of 125,000 homes. The 30% reduction in utilities would save those school district 110 Million dollars per year, enough to hire an additional 2,200 teachers. Visit supercleaningservicelouisville.com.
Where would a commercial or industrial property owner interested in solar energy even begin? The best place to howells ac start is always with a comprehensive energy plan that has been customized to your building. Our expert team is ready to guide you through every decision point, maximizing your investment dollars and saving you money.
With the changes that are taking place in Washington and the selection of Rick Perry to lead the Department of Energy, many of the subsidies for renewable projects could very well be scaled back, if not phased out completely. As a country, we have spent the better part of two decades weaning ourselves off of fossil fuels. Renewable energy was an industry in its babyhood with almost unlimited potential and most renewable energy projects were easy to sell with a major portion being funded by large government grants and subsidies. Now that the era of incentivization is coming to its conclusion, will the Sustainable Energy sector be sustainable?
Or, is this the end of renewable energy projects?
Riding with the Big Boys
In all new sectors of business, there comes a time when the government subsidy training wheels must come off. This is the test of any good industry. Can Sustainable Energy become the “big-boy-bike-riding” industry that it has been touted to be for the past 20 years?
The answer is absolutely.
Now more than ever before, those that want to see sustainable practices and increased use of renewable energy sources need to change how we communicate the beneficial impact of energy projects. It is no longer enough to tout the environmental impact of these projects. Times have changed and the conversations around energy projects must also change in order to still be relevant today.
Bumps & Scrapes
I know it may be hard to believe, but not every company or the executives that run them, give a second thought about the environment. This doesn’t make them bad companies or executives. To some, the capital outlays need to bring a return, because their role within the company is to steward the limited resources that they have, to bring the biggest ROI. With the potential of losing some or all government incentives, we need to better understand how to communicate to those that lead the financial realm of our companies. If you’re not a numbers guy, there is a great tool, provided by Xcel Energy here, to assist you in making your case.
The benefits of renewable energy are proven to save money for many companies as well as provide an additional connection point with energy conscience consumers. Technological advances are also continuing to improve upon the efficiency of captured energy (i.e., solar panels designed by Elon Musk’s company, Tesla), which add considerable promise for the future of many forward-thinking companies looking to shave expenses.
Beyond a simple cash on cash return there are many other factors within energy projects that need to be quantified in order to compete head to head with other projects. Studies have shown that energy projects not only can save on operating costs, but may lead to increased productivity and overall employee health creating a much greater impact to the bottom line than just the easily quantifiable monetary gain, check thelockboss.
As the industry grows from adolescence to adulthood it will prove time and again, that for the money, Renewable Energy Projects not only pay, but create the greatest value for the organization. Looking forward, it is a very exciting time to be involved in the renewable energy sector, watching it take its first few wobbly trips down the block. It’ll soon enough be yelling, “Look Ma, no hands!”
What used to be considered green virtue has now morphed into a crucial competitive tool.
That business has a role to play in improving the environment and dealing with climate change is certain. What is much less so is how to do that, and for some, whether to try. After all, companies feel comfortable doing business as usual, and few want to threaten their competitiveness in favor of green virtue.
Our point is that this is not an either or question. A growing number of examples—from diverse industries—show that sustainable business practices can be good for business from the bottom-line up. For example, Unilever (UN -1.70%) has developed washing-up fluids that use less water—and sales are growing fast, particularly in water-scarce markets. And most everyone can name a favorite product or two whose brand is intimately associated with its green credentials. My point is that sustainability can be much more—that it has a role in any and all sectors.
Here are a few examples that McKinsey has been involved with that prove the point. (For confidentiality reasons, we cannot use the company names).
⦁ A major brewer identified some 150 possible improvements that could reduce GHG emissions—while saving $200 million over five years.
⦁ When a water utility benchmarked its performance against that of other utilities, it figured out where the biggest opportunities were—in this case energy and chemicals. After four years, the results were in: less leakage, fewer customer complaints—and $178 million in savings—a 25 percent reduction in operating costs.
⦁ A state-owned industrial company in China increased the energy yield of its coal significantly simply by tracking it better, making sure the first mined was the first used. That improved energy efficiency as well as carbon intensity, while reducing costs 13 percent.
The nitty-gritty of sustainability programs can get complicated. But the principles are actually pretty simple—and should be familiar to executives. First, and most important, is to acknowledge that sustainability is serious. The case is not that difficult to make. In a McKinsey survey of 340 executives, more than 90 percent said risk management—whether from consumers, regulators, or the market (for example, high resource prices)—was an important factor in pushing them toward sustainability initiatives, check chiropractic techniques.
Once the decision is taken, define priorities, set measurable targets, evaluate costs and benefits, and create consistent incentives, including those related to executive compensation. For example, Nike (NKE -2.05%) tracks its suppliers on a range of metrics, including quality, timeliness, cost—and sustainability. Falter for long on any of these, and the consequence is fewer orders. Result: many more suppliers are hitting their sustainability mark. DuPont (DD -1.22%) has no trouble justifying its sustainability initiatives to shareholders: it is generating billions in revenue from products that reduce emissions. Intel (INTC -0.32%) has a dedicated finance analyst whose job is to calculate the value of its sustainability efforts. To reduce emissions and improve other environmental metrics in its food chain, Wal-Mart (WMT -1.48%) tracks not only GHG output, but also yield, water use, and other factors per ton of food produced. In addition to achieving environmental improvements, it cut the price of food and vegetables in the United States by $3.5 billion.
It is important to define targets that are both specific and achievable; it’s better to say “Eliminate X million pounds of packaging,” than the vague “Reduce the footprint of our packaging.” As of August 2014, though, a McKinsey analysis found that only one in five companies in the business marketing 500 had explicit, long-term sustainability goals, even though more than a third (36 percent) said sustainability was a top-three priority.
The larger point is this. Real sustainability efforts are core business efforts; because they are not always easy, they can help a company to raise its game and perform better in all kinds of ways. In mid-2014, McKinsey did a study that found a strong correlation between resource efficiency and financial performance; the companies with the most advanced sustainability strategies did best of all. In a study for the Harvard Business School that drew similar conclusions (higher return on equity and assets for higher-sustainability companies), the authors concluded, “developing a corporate culture of sustainability may be a source of competitive advantage in the long run.”
To think of sustainability as a niche gets it wrong. To do it right, companies need to be rigorous, goal-oriented, and accountable. The evidence is building not only that sustainability initiatives work, but that they are an important factor in creating long-term value.
Jeremy Oppenheim is a director of McKinsey & Company, based in London and a global leader in the Sustainability & Resource Productivity network. In 2014, he served as program director for the Global Commission on the Economy and Climate. Martin Stuchtey is Director of the McKinsey Center for Business & Environment and is based in Munich.
In a 2011 blog Article, Take Credit for Your Business, we discussed how the R&D Tax credit provided potential sources of cash for manufacturers of all sizes that have incurred expenses in pursuit of new or improved process (e.g. Additive Manufacturing), products (e.g. new product engineering, or applications of AM throughout the product development lifecycle), performance, reliability, or quality. However, until 2016 the reality was that many small and mid-size companies and their tax advisors felt it was simply not viable to pursue this tax credit. The reasons included the complexity of the documentation, the cost of hiring experts to do documentation, and general confusion over what expenses qualified and which did not. In many other cases, the tax credits generated could not be used because of limitations created by current tax rules. So it’s not surprising that the majority of companies that have historically taken advantage of this benefit were big businesses. visit here milfster.org
We are pleased to report, that this situation has changed due to some late legislation that was passed in December 2015: the Protecting Americans from Tax Hikes (PATH) Act of 2015. That legislation, in addition to making the tax credit permanent for the first time in the credit’s 35-year history, significantly enhanced how small and mid-sized manufacturers (SMMs) can benefit from the research tax credits they can generate, utilizing the following significant provisions:
Eligible SMM’s may now claim the credit against the Alternative Minimum Tax (AMT) to offset AMT for tax years beginning after December 31, 2015.
Some start-up companies may offset payroll taxes with the credit: beginning in tax years beginning after December 31, 2015, certain start-up companies will be allowed to utilize the research credit to offset the employer’s payroll tax (i.e., FICA) liabilities.
How are these significant changes? In years past, a large number of eligible SMM’s (especially S Corporations and other flow-through entities) did not pursue the R&D Tax Credit because the AMT prevented them from using the R&D Tax Credits that they could generate. In addition, young companies typically don’t have a need for tax credits because their expenditures are higher than their sales, thus creating operating losses. Both of these new changes will allow a higher number of companies to immediately monetize the credits they can generate!
According to Scott Schmidt of Black Line Group, the definition of R&D under the law remains much broader than most people realize. For example, time and materials spent prototyping using AM technologies and equipment, costs to experiment with different designs and materials, the design/engineering of new parts and components, and periodically activities related to software development, can all potentially generate R&D Tax Credits.
Manufacturers of all kinds, including those that design and develop their own products, as well as contract manufacturers and job shops, can all take advantage of the R&D Tax Credit. Both the customer and vendor (job shop/contract manufacturer) of an R&D part can take the credit, since the customer will have qualified expenditures around the “PRODUCT” development/improvement activities of the part or component, while the vendor will have qualified expenditures associated with developing the “PROCESS” for making the part.
Schmidt encourages potential and first time users of the R&D tax credit to get ahead of the game and immediately start documenting their “qualified costs” in preparation to start pursuing the R&D Tax Credit in 2016. He notes that companies that make parts for their larger customers in particular (e.g. metal stampers and fabricators, precision machinists, mold builders and plastic injection molders, tool and die makers) should seriously begin to evaluate whether they are eligible for the credit.
Note: the information contained in this article should not be interpreted as advice or as an endorsement of any product or service, and cannot be used by the reader for promoting, marketing, or recommending any matter or actions addressed in this article to other parties. Mr. Devereaux is not a tax expert and anyone who wishes to pursue this credit should consult a tax accountant for advice.