Skip to main content
Windustry's Resource Library



Beginning with the American Recovery and Reinvestment Act of 2009, the owners of wind facilities that were PTC eligible, were allowed to choose to use the PTC or to use the Investment Tax Credit (ITC) under Section 48 of the Code instead (See IRS Notice 2009-52, issued June 5, 2009). This was not a new tax code and had been in use with some success for distributed small wind and solar for a few years. Also, using the ITC removed the language the “energy must be sold to an unrelated third party” and opened up more diverse business models, previously unavailable under the PTC such as sale-leaseback and inverted lease.

The ITC is generated and claimed in the year the project goes into service. The ITC for a renewable energy facility is valued at 30% of the qualifying eligible cost of the facility. Certain costs are not eligible to be included in the 30% basis calculation such as operating reserves, permanent loan fees, transmission lines.

Small wind turbines and solar were among the eligible technologies for the ITC prior to the ARRA act in 2009.  PTC-eligible facilities which have opted into the ITC (must have commenced construction prior to January 1, 2014 under current law) remain eligible for a 30% ITC until January 1, 2017.

The ITC, unlike the PTC, is not reduced due to the presence of state or federal grants, tax exempt bonding or other “subsidized energy financing”.

A March 2009 NREL study analyzing the differences between the PTC and the ITC concludes that in most cases, the PTC is better for projects with higher capacity factors and lower installed costs. The report explains, “projects that cost $1,500/kW or less are likely to receive more value from the PTC, while projects that cost more than $2,500/kW are likely to be better off with the ITC. In between these two cost extremes, capacity factor is a more important determinant” (Bolinger and Wiser 2009).