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Utah has been offering a tax break for alternative energy projects for a decade, but the state has never paid out a dime for this program.
The Alternative Energy Development Incentive was set up to allow companies to keep up to 75% of state tax revenue generated by the projects for 20 years. Qualifying projects must produce at least two megawatts of electricity or 1,000 barrels of “oil equivalent” from hydroelectric, solar, biomass, geothermal, wind, nuclear or “certain unconventional resources.” Those unconventional resources include tar sands and oil shale.
“Based on what we’re seeing, companies are finding other tax incentive programs that prove more advantageous, so they bypass the AEDI,” said Harry Hansen, communications director for the Utah Office of Energy Development. “Two examples of this are both the Economic Development Tax Increment Financing (EDTIF) and the Rural Economic Development Tax Increment Financing (REDTIF). They seem to provide somewhat similar incentives, but companies find those two are better suited for their pursuits.”
Like EDTIF and REDTIF, the alternative energy incentive was set up to be “post-performance.” That is, the companies first must show they have generated the tax revenue before they are awarded a portion of it. Such incentives lower the risk for the state because no funds are granted until the results are proved.
The AEDI incentive came out of SB65, passed by the 2012 Utah Legislature. It was sponsored by now-Senate President Stuart Adams, R-Layton. The House sponsor was former Rep. Mike Noel, R-Kanab.
“It’s too bad somebody didn’t use it,” Adams said when asked about the incentive. The lawmaker said he supports development of all forms of energy, including renewables and fossil fuels, but he couldn’t recall the specifics of the bill or why no one has used it. “You’d have to ask industry people. I don’t know.”
The measure’s fiscal note foresaw millions of dollars being diverted from state funds. “Presuming the state has 20% of its energy in 2025 produced by the alternative energy sources identified in this bill, enactment of this bill may forgo revenue to the education fund by about $60 million and forgo revenue to the general fund by about $14 million” in fiscal 2025.
A 2017 performance audit from the Utah legislative auditor general’s office said, “Applicants have been approved to take over $30 million in the Alternative Energy Development tax credit, but have not yet claimed it.”
Apparently they never did.
AEDI is one of several incentive programs available, and the other incentives do have active participants.
The Renewable Energy Systems Tax Credit offers homeowners and businesses credits for installing renewable energy systems, although the homeowner portion is being phased out, much to the disappointment of clean-energy advocates. Utah once offered homeowners a tax credit to cover 25% of the cost of installing rooftop solar panels, up to $2,000. The credit drops to a maximum of $800 in 2022 and $400 in 2023. It vanishes in 2024.
For businesses, the tax credit covers 10% of renewable energy system cost up to $50,000. In 2021, 95 projects were approved and $2,194,165 worth of credits were issued.
The Production Tax Credit is available to renewable energy projects, and it offers a tax credit of about a third of a penny on every kilowatt-hour of renewable electricity produced during the first four years of production. Some 42 projects have participated in the program, most of which have already reached the four-year limit. There are nine projects still eligible for the credit.
The High-Cost Infrastructure Tax Credit is aimed at major infrastructure projects. Those can include renewable energy projects, but the incentive is not exclusive to them. There are 13 projects participating in this tax credit, which is aimed at infrastructure for energy systems, water systems, pipelines, transmission lines and Tier 3 gasoline refinery conversion.
Tim Fitzpatrick is The Salt Lake Tribune’s renewable energy reporter, a position funded by a grant from Rocky Mountain Power. The Tribune retains all control over editorial decisions independent of Rocky Mountain Power.