ven as the solar industry trade war between China and the U.S. reaches a fever pitch, Ernst & Young's latest quarterly Renewable Energy Country Attractiveness Index (CAI), released in late February, finds that the U.S. has passed China in terms of investment in solar and wind technologies.
Among its findings: "The sector will continue to grow in emerging markets, thanks to ambitious installation programs, but more established markets will face increasing financial constraints, especially within the Eurozone, where the sovereign debt crisis continues to stifle investment."
Also, "Capital scarcity and increased competition from Asia will also continue to put pressure on developed markets. This could lead to consolidation of wind and solar sectors and increased vertical integration, as equipment manufacturers look for ever more innovative routes to market."
A new report offered in concert with the CAI — United States Renewable Attractiveness Indices — benchmarks the U.S. state investments driving the shift to overtake China.
No surprise: California tops the "All Renewables Index," followed by New Mexico, Colorado, Hawaii and then Massachusetts and Texas in a tie for fifth.
Michael Bernier, senior manager, National Tax, Ernst & Young LLP, said the new U.S. indices not only fine-tune the discussion, but offer insights into new leaders in energy infrastructure.
"Massachusetts, for example, is a top-five solar market due to a multitude of state-level initiatives, even though it is not the sunniest market," he said. "Like Colorado, Massachusetts is building up its research and development in addition to its manufacturing facilities. These factors make renewable energy development in these states possible and further investment probable."
Here are the top performers, according to Ernst & Young. For the full reports, click here.
Top U.S. Index Rankings
|All Renewables||Long-term wind||Long-term solar|
Find the Green, Then Make it Pay
Just in time to herald spring, E&Y on March 19 issued a separate but possibly very related report: "Working Together: Linking sustainability and tax to reduce the cost of implementing sustainability initiatives."
The firm surveyed 223 senior executives at primarily U.S. companies and found that only 16 percent of those who either have or are developing an environmental sustainability strategy said their tax or finance departments are actively involved in it.
Of the survey respondents, 19 percent were chief sustainability officers (CSOs), while 81 percent were tax directors or their equivalent.
"Responses from each group were vastly different, highlighting the lack of coordination between the two groups," said E&Y. (Across the nation, readers nod their heads in recognition.) "For example, only 28 percent of tax directors believe their company has a sustainability strategy or is developing one, compared to 90 percent of CSOs surveyed."
"Reducing energy consumption and carbon emissions, switching to alternative energy and fuel sources, innovating for cleaner technologies and offsetting carbon emissions — all of these efforts have tax considerations," said Paul Naumoff, Ernst & Young's Global and Americas Leader of Climate Change and Sustainability Services and CleanTech Tax Services. "Companies with tax departments that aren't taking sustainability efforts into account are missing an opportunity."
The lack of involvement by the tax department in the sustainability strategy is reflected in the awareness and use of incentives for sustainability initiatives, with over 37 percent of survey respondents unaware of such incentives, said E&Y. For some incentives, such as federal tax deductions for energy-efficient buildings and incentives for renewable energy, awareness levels were over 80 percent. "However, for state tax credits and incentives, awareness levels hovered around 50 percent and were even lower for local credits and incentives," said the firm. "Even for those who are aware, only 17 percent of respondents said their companies actually use available green incentives. This lack of awareness represents missed opportunity."
The survey also found that among respondents that have or are developing sustainability strategies, only 19 percent said their company uses different payback or Return on Investment (ROI) targets to evaluate expenditures related to environmental sustainability projects as compared to required payback period or ROI requirements for typical internal capital expenditure approvals. "Given the lower ROI of some sustainability projects, it is important for tax directors to be integrated into the planning process," said E&Y, "in order to reduce the overall cost through the use of all available incentives."
The RSIO Framework
Ernst & Young recommends framing the internal discussion of sustainability initiatives in broad categories:
It then offers the following examples:
In addition to guidance from specialty practices at firms such as Ernst & Young, the most up-to-date U.S. green incentives information (including local measures) can be found in the Database of State Incentives for Renewables & Efficiency, which has recently updated its very handy incentives search engine.
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