The main differences between the Investment Tax Credit (ITC) and the Production Tax Credit (PTC) lie in their eligibility criteria, application processes, and how they benefit project developers:
Eligibility and Application Differences
- Eligible Technologies:
- ITC: Traditionally focused on solar projects and also includes other technologies like energy storage, microgrid controllers, and more. Under the Inflation Reduction Act (IRA), it remains primarily solar-focused with options for other clean energy technologies.
- PTC: Originally targeted at wind energy, but the IRA has expanded its eligibility to solar projects as well.
- Calculation Basis:
- ITC: Calculated as a percentage (currently 30%) of the total upfront cost of the project.
- PTC: Calculated based on the amount of electricity produced, with a per-kilowatt-hour (kWh) credit over the first ten years of operation.
- Application Process:
Both credits require projects to be placed in service within specific time frames to qualify, with the IRA extending eligibility through 2032 for ITC and introducing PTC for solar. - Bonus Eligibility:
ITC & PTC can both receive bonus credits if projects meet additional criteria, such as paying prevailing wages and using domestic content. Bonus credits can increase the base credit value significantly. - Direct Pay Provision:
Both credits are eligible for direct pay under the IRA, allowing tax-exempt entities to receive their full credit value directly from the government rather than waiting for tax filing.
Additional Considerations
- Performance Risk: PTC exposes developers to performance risks since credits are tied to electricity production over ten years, while ITC provides an upfront incentive based on initial investment.
- Capacity Factor and Capital Costs: Projects with higher capacity factors or lower capital costs might prefer PTC, while those with higher capital costs may benefit more from ITC.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-main-differences-between-itc-and-ptc-in-terms-of-eligibility-and-application/
