Financial Incentives for Green Construction

  • January 27, 2013

In the recent movie ‘Lincoln’ by Steven Spielberg, Abraham Lincoln is faced with a difficult choice that will affect millions of lives, current and future. The Civil War is in its fourth year, Lincoln has just been reelected to a second term and the Confederate states have come to him with an offer of surrender. The catch is that they are asking him to repeal the 13th amendment which outlaws slavery. The path of least resistance, based on many of the voices, would be to end the war immediately by repealing the amendment and allowing slavery to continue. As we know from history, Lincoln, made the hard choice to keep the amendment, thereby prolonging the war. He stood firm for what he believed was right.

While the moral choices are not as stark in engineering, we are frequently faced with a choice to take the path of least resistance by designing or installing the least expensive, least efficient building systems available. In most situations it is found that by spending a little more up front for a more efficient installation, building owners will save money in the long run. Fortunately there are many energy incentives that will make this choice easier.

The energy incentives fall into three categories: rebates/grants, tax credits, and tax deductions. These incentives are frequently enough to allow the owner to ‘pull the trigger’ on a more efficient project than they otherwise may have done.

  • Rebates and grants are money that is given directly to the owner before (grants) or after (rebates) the project has been completed. ARRA, Oregon Department of Energy’s (ODOE’s) SB1149 program, Energy Trust of Oregon (ETO), BPA, Clark PUD, EWEB and many other local utilities will pay a certain percentage of the total project cost based on the annual calculated energy savings. These incentives typically pay for 10%-50% of the entire project.
  • Tax credits are reductions in the tax owed by the owner based on the annual energy saved. In Oregon, under the EIP (formerly BETC) these tax credits will pay for 35% of a qualifying project. Owners with no tax liability are able to auction off their tax credits to the highest bidder.
  • Finally, the federal government offers a tax deduction for qualifying projects. This deduction through the IRS reduces taxable income by $0.30-$1.80 per square foot of the affected building.

One example is a recent project R&W completed for the Oregon Trail School District. As part of ODOE’s SB1149 school efficiency program, R&W conducted energy audits on all 10 schools in the district. From these studies, the district was able to identify and quantify multiple energy upgrade projects at each school, including replacing inefficient boilers, delamping over lit areas, upgrading lighting controls, replacing single pane windows and upgrading old pneumatic HVAC control systems to modern digital controls. As a result of these studies, ODOE in partnership with ETO was able to provide the district substantial incentives to help complete these improvements. These energy upgrades will result in lower utility bills, lower operation and maintenance costs and more comfortable classroom environments.

While we don’t face moral choices as encompassing as Abraham Lincoln, we are all faced with many small choices every day. Will we take the path of least resistance or will we implement energy efficient practices to reap benefits in the future? Thankfully, the incentives available make the choices easier for us. The benefits reaped will affect generations for years to come.

Author: Mark D. Jones, LEED® AP
Mr. Jones is very proficient at HVAC, piping and plumbing design, energy audits, life cycle cost analysis, LEED energy modeling and commissioning, as well as knowledgeable in the various mechanical, plumbing and energy codes.  He has worked on various projects with utilities and state agencies, including Energy Trust of Oregon, Clark Public Utilities, Bonneville Power Administration and Oregon Department of Energy to improve energy efficiency for clients while helping in securing rebates and incentives. He has taken the lead in developing and promoting R&W’s energy efficiency and commissioning services.
  • January 27, 2013