Last Updated on March 29, 2023 by mykeclark
The Canadian renewables sector has received strong support from the federal government with key provisions contained in the 2023 budget, which was released March 28, 2023. The introduction of a 15% Clean Electricity Investment Tax Credit (“ITC”) has the potential to rapidly accelerate the adoption of solar in Canada. Several other provisions will support the transition to clean electricity and benefit the industry. But it is the ITC that will have the greatest immediate impact and will support an increased focus for Solar Alliance in Canada.
The refundable incentive offers up to 15% of the cost of capital investment and encourages Canadians to transition to net-zero energy. The ITC is a dollar-for-dollar credit against a company’s tax liability, reducing the cost of solar systems.
As a company focused in the United States, Solar Alliance has seen the positive impact of a 30% investment tax credit in the U.S. The goal for the Canadian ITC and other incentives are to enhance the country’s competitiveness. It will make Canada more attractive to investors and level the playing field with the United States. While the Canadian ITC is lower than the U.S. ITC, it is a new initiative that will immediately benefit the deployment of solar in Canada.
Our customers in the U.S. have benefited from this tax credit, which lowers the cost of a solar system significantly. Solar Alliance, as the owners of two projects in New York, has also benefitted from the U.S. investment tax credit. The tax equity financing for those projects reduced the amount of equity required and increased project economics.
Our view is that an investment tax credit is one the best ways to drive solar adoption. Because of this, Solar Alliance is actively assessing opportunities for growth in Canada in order to capitalize on this growing market opportunity. Check out our recent corporate update where we discuss these plans.
Here are the key clean energy provisions in Budget 2023, from A Made-in-Canada Plan: Affordable Energy, Good Jobs, and a Growing Clean Economy:
- Clean Electricity Investment Tax Credit
To support and accelerate clean electricity investment, Budget 2023 proposes to introduce a 15 per cent refundable tax credit for eligible investments in non-emitting electricity generation systems. Taxable and non-taxable entities such as Crown corporations and publicly owned utilities, corporations owned by Indigenous communities, and pension funds, would be eligible for the Clean Electricity Investment Tax Credit.
- A Clean Electricity Focus for the Canada Infrastructure Bank
Budget 2023 announces that the Canada Infrastructure Bank will invest at least $10 billion through its Clean Power priority area, and at least $10 billion through its Green Infrastructure priority area. This will allow the Canada Infrastructure Bank to invest at least $20 billion to support the building of major clean electricity and clean growth infrastructure projects. These investments will be sourced from existing resources.
- Clean Technology Manufacturing Investment Tax Credit
Budget 2023 proposes a refundable tax credit equal to 30 per cent of the cost of investments in machinery and equipment used to manufacture or process key clean technologies, and extract, process, or recycle certain critical minerals essential to clean technology supply chains.
- Supporting Clean Electricity Projects
Budget 2023 proposes to provide $3 billion over 13 years to: Recapitalize funding for the Smart Renewables and Electrification Pathways Program to support critical regional priorities and Indigenous-led projects; and Renew the Smart Grid program to continue grid innovation support.
“Budget 2023 is strong signal to the renewables industry that Canada is prepared to compete in the global clean energy movement,” said Solar Alliance CEO Myke Clark. “The investment tax credit introduced provides substantial long-term support to the solar and energy storage industry. For Solar Alliance, this budget only increases our desire to pursue growth opportunities in Canada this year.”