How to Save Up To 42% On Eligiable Costs For Green Energy Projects

There are a few different government programs that you can access to help offset the costs of green electricity initiatives or environmental projects, such as waste heat recovery. The one that I am writing about here is the Scientific Research and Experimental Development (SRED) program. This is a program that is run by the Government of Canada through the Canadian Revenue Agency and provides either tax credits or a refund depending on the type of company you are. I won't be going into the corporate structures and how they work with SRED (some detail is provided below), but if you are interested, please contact me at chris@threepointenergy.com and I will get you a contact that you can talk to about this.

The following information comes from Wikipedia:

"SR&ED expenditures (already deducted against revenue) may qualify for investment tax credits (i.e., a reduction in income taxes payable), cash refunds, or both. Qualifying expenditures may include wages, materials, machinery, equipment, travel and training expenses, property taxes, utility expenses some overhead, and SR&ED contracts from the following activities:

- Experimental development
- Applied research
- Basic research
- Support work

In order to claim such expenditures, an assessment on scientific or technological eligibility of the claimed activities needs to be performed, according to three criteria:

- Scientific or technological advancement
- Scientific or technological uncertainty
- Scientific and technical content"

SRED can be a great way to offset the costs of green energy projects that you plan to undertake. Depending on the legal structure of your company, credits can be up to 35%. For a Canadian Privately Controlled Company (CPCC), the Credits on the first $2M of eligible costs on a project are 35% and 20% on the rest. For other corporations and such, there is a 20% credit on all eligible costs on the project.

In addition to this, the different provinces have territorial tax credits. For example, Alberta and British Columbia have 10% credits. When you take this into effect and you are a Canadian Privately controlled company, then the blended rate that you can achieve on a project that is $2M and below is 42%.

Example:

Say you have a $2M project and you are an Alberta based CPCC and 4% of the project costs are eligable for a combined 42% tax credit, then your $2M project is now $1,664,000 and you saved yourself $336,000 or 17% by applying for SRED. Right out the gate your project will pay for itself quicker. At $75/MWH on a 1 MW turbine, a $2M project would have a simple payback of 3.17 years. With SRED applied under these circumstances, the the simple payback would be in 2.64 years instead of 3.17 years.


The Government of Canada does provide a self assessment tool to see what areas of your project might be included in a SRED claim. This information Can be found here.

Obviously with this incentive and others can have a significant impact on any environmental or green project that you may be undertaking. To understand how SRED can play into your projects please contact Three Point Energy and we will be more than happy to assist you in getting started.

Three Point Energy Inc. assists companies with profitable green projects. Three Point Energy Inc. can be contact at info@threepointenergy.com.