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151 comments on Clinton's New Energy and Climate Policy

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mdsolar on November 8, 2007 - 9:07pm

Under the Modified Accelerated Cost-Recovery System (MACRS), businesses can recover investments in certain property through depreciation deductions. The MACRS establishes a set of class lives for various types of property, ranging from three to 50 years, over which the property may be depreciated. For solar, wind and geothermal property placed in service after 1986, the current MACRS property class is five years. With the passage of the the Energy Policy Act of 2005, fuel cells, microturbines, and solar hybrid lighting technologies are now classified as 5-year property as well. 26 USC § 168 references 26 USC § 48(a)(3)(A) with respect to classifying property as "5-year property" and EPAct 2005 added these technologies definition of energy property in § 48 as part of the business energy tax credit expansion.

Solar power equipment, including PV, gets accelerated depreciation. With the cost curve of solar PV, you might be hard pressed to get much for five year old equipment if you liquidated so this rule seems pretty realistic. I notice Walmart is putting in skylights. They get to depreciate these over 5 years as well.

Chris

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eric blair on November 9, 2007 - 11:30am

But, don't you think you'd sell more if PV was not exempted under 179?

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mdsolar on November 9, 2007 - 12:15pm

It is a difference of one or five years for businesses. You might see staggering if you had to do it all in one. I think what is holding solar back right now is manufacturing capacity. Most silicon production is presold by a number of years. Thin film is trying to fill in, and that works for businesses, but the residential market does best with silicon still. I think programs like those in NJ and CA are getting things going and there are prospects for faster build up of silicon production but right now it remains a seller's market. In five years we should see much lower costs and in another five years again, so I think the 5 year schedule makes sense.

Chris

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151 comments on Clinton's New Energy and Climate Policy

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