Measuring the power of energy from a different point of view: Tax Breaks in a fresh market

The unlimited possibilities for a company deciding to enter in an early stage of a market which is still under-going a process of configuration and direction is promoted where there are weaker companies. This position is even strengthen where these ones do not process or enjoy the same know how, causing a burst in benefits in the middle and long term. 

What else can a company achieve?

In a rapidly expanding market as it is the energetic one, those companies who have decided to invest in it are not simply seeking a market dominant position: their real desire lies within building the image of a trustworthy company that looks for clean and renewable friendly energies as the chosen future source of growth. Even deeper than this, as a result of the former, and what mostly attracts powerful investors to its configuration are the tax breaks produced.

As a clear example, we can examine the past buyout of Google. The company announced that it had signed a contract to buy the entire output of the 239.2 MW Happy Hereford wind farm that is being developed by Chermac Energy.  The project is expected to begin operation in late 2014.

Undoubtedly, Google is pleased with all the favorable publicity the company has received for being so environmentally committed. They even boast their green projects:

 “For transparency’s sake, we’re also reporting our footprint without those purchases. We urge others to do the same, which is why we participate in the World Resources Institute Scope 2 accounting process,” Nickerman explains. “This helps to ensure greenhouse gas reporting remains transparent and meaningful.”

The media has also reported Google’s funding are:

“Incredible awesome and seek the future tools for promoting green energy”

However, those who praise and thank Google for adopting a green politic are what Google knows for being here in the other flip of the coin

A point that none of the media stories have mentioned will be, amongst others, that taxpayers will have to cover the cost of the tax breaks that the wind farm owner, namely Google, will enjoy. 

The most lucrative USA tax break for the project owners will probably be the federal wind production tax credit (PTC).  This tax break will provide the owners with a tax credit, currently set at $0.023, for each kilowatt-hour of electricity that the “wind farm” produces during the first 10 years of operation.

Also, the wind farm owners will likely qualify for another lucrative federal tax break known as “accelerated depreciation” which allows the owners to depreciate for tax purposes the entire capital cost of the wind energy equipment over a 5-year period, thus providing a significant cash flow benefit.

The actual cost of the PTC to taxpayers can only be estimated at this time since the amount paid depends on the amount of electricity produced as well as the rate at the time of production. 

To sum up, Google will not only cause a positive impact in global society as a influential company supporting green energies, but meanwhile in the back door will higher its benefits as a result of the difference between what these wind mills will produce and the tax breaks.  

Name it marketing or company politics, energy is not only positive for the world's future survival, but as a tool to exploit its market eccentricities. As such, these advantages will be normalized once the market stops it swerve.