New Tax Credits Provide Big Returns for Commercial Solar

The commercial solar sector is poised for significant growth after the announcement of several industry-scale refundable tax credits aimed at accelerating the growth and adoption of clean energy in Canada. Budget 2023 focuses on growing a clean economy and developing net-zero industries in response to fighting the global challenges of climate change. Three of the main priorities that were listed as important within the solar sector are electrification, clean energy, and transitioning to electric vehicles (EVs). Two significant tax credits were introduced; the Clean Technology Tax Credit (CTTC) and Clean Electricity Investment Tax Credit (CEITC).

The Clean Technology Tax Credit (CTTC) is a government incentive aimed at promoting the development and adoption of clean technology in Canada. The tax credit allows eligible businesses to claim a 30% tax credit on the capital cost of investments made by taxable entities in solar PV and energy-storage technologies. The goal of the tax credit is to encourage businesses to invest in cleaner and more sustainable technology, which will help reduce greenhouse gas emissions and promote a greener economy.

In addition, non-taxable entities are eligible for the Clean Electricity Investment Tax Credit (CEITC) which provides the same benefits at the rate of a 15% tax credit. Tax credits directly reduce a taxpayer’s tax payable, if any, to nil. The remaining balance is then paid out in cash. Both of these tax credits are applicable for new construction and the refurbishment of existing projects from now until 2034.

Industrial Clean energy projects are also eligible for an accelerated capital cost allowance (CCA) which enables an enhanced first-year write-off of 100% on all eligible solar equipment. This enhanced first year is reduced to 75% in 2024-25 and to 55% in 2026-27. All solar equipment in Canada is also PST exempt

Commercial solar costs about a million dollars per 500kW system. In BC, a 500kW system could produce approximately 550,000 kWh annually. The organization’s operational costs would be decreased through utility savings from the day the system is commissioned. The existing CCA would enable 100% of the system cost to be written off as an accelerated capital cost in 2023, directly reducing the tax owed. In addition, the application of the 30% refundable tax credit (CTTC) on the total cost, in this case, provides a $300,000 return. The ability to pair the two tax incentives significantly accelerates the return on investment and bridges the upfront costs required to convert to solar.

Overall, Canada’s Clean Technology Tax Credit is a positive step towards a more sustainable future, and it highlights Canada’s commitment to reducing its environmental footprint while supporting innovation and economic growth. The solar industry is expected to scale and create many jobs within the industry in the coming years.

At Pure Solar, we provide a free consultation service that generates a free solar assessment for prospective solar clients. This no-obligation service provides you with a detailed understanding of the solar potential of your facility before committing to converting to solar. We find that customers appreciate having an informed understanding before engaging in a serious solar discussion. Please feel free to reach out to our team to receive your free solar assessment.

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