Canadian Investment Tax Credit (ITC) for Commercial Solar Installations in Alberta
October 26, 2024
Grant Funding
Solar power is more than just a green initiative—it's a smart financial move for businesses of all sizes. From substantial cost savings, energy efficiency gains, and reduced operational expenses to enhanced brand reputation and resilience against energy price volatility, the solar benefits for commercial business owners are extensive. In this article we will dive into the tangible returns on the new tax incentives for commercial solar systems in Canada.
The sun emits enough energy to blanket the earth in approximately 1,000 watts / square meter on a sunny day. Solar panels are able to capture 30-50% of this energy and turn it into usable power for people and businesses. Over the past decade, solar material costs have reduced 10x and the technology has emerged as one of the lowest cost, clean electricity sources worldwide. Solar microgeneration systems (sized 150 kilowatts or less) can be added to any building in Canada and typically have warrantied lifespans of 25-30 years.
Businesses are some of the largest electricity consumers on the grid. If your business has large refrigeration or heating requirements, motor loads, and/or large work area, your business likely pays $1,000s to $100,000s for electricity every month.
By installing commercial solar, your business can:
Now, Canadian businesses will also have the opportunity to cash-in on a lucrative tax rebate to help them save even more. Coming soon, your business can also,
Solar will not directly reduce your building power consumption; however, it will reduce the amount of electricity you import from the grid because you will be using free energy from your solar system instead. In Canada, almost all provincial and territorial jurisdictions follow Net Metering regulations that allow customers to sell any unused electricity back to the grid. Customers are free to select retailers of their choosing to optimize the rate they buy and sell at. Importantly, net metering provides a credit to their retailer account. These credits can be used for future electricity costs only, they cannot be redeemed for cash. For more information, see the Government of Canada Net Metering examples here.
The purpose of the Investment Tax Credit as proposed in Bill C-59 (1) is to encourage the investment of capital in the adoption and operation of clean technology property in Canada. As of this writing, the bill is awaiting Senate review and completed its second reading (of three) as of June 4, 2024.
The ITC will be refundable and available to qualifying taxpayers that make eligible investments in clean technology property after 28 March 2023 and before 2035. The credit varies on A) the year in which the property is required and made available for use, and B) whether certain labor requirements are met in construction of the project (see requirements below).
ITC is only available to taxable Canadian corporations that acquire clean technology property (solar, wind, battery storage, off-road EV charging solutions). Highlights of the rebate are as follows:
Lets say you spend $500,000 to install solar on the roof of your business warehouse. With 100% of conditions met, the ITC will provide a $150,000 refundable tax credit at a 30% rate. Based on how the legislation stands in June of 2024....
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Yes, a recapture of the credit received will apply if the property is converted to a non-eligible use, disposed of or exported from Canada within 10 years of the date it was acquired.
The ITC is calculated net of other incentives. The capital cost base on which the ITC is calculated must be adjusted for any other ITCs applicable to the property. Furthermore, where the taxpayer has received assistance, either from the government or non-government organizations, the ITC is calculated on the cost base of the equipment net of any financial assistance received.
Sources
(1) C-59 , 44th parliament, 1st Session November 22, 2021, to present. LEGISinfo. (n.d.). https://www.parl.ca/LegisInfo/en/bill/44-1/c-59
(2) EY Canada. (2023, August 17). Ey tax alert 2023-33 - proposed Clean Technology Investment Tax Credit. EY Tax Alert 2023 no 33 - Proposed clean technology investment tax credit. https://www.ey.com/en_ca/tax/tax-alerts/2023/tax-alert-2023-no-33