Canada formalizes 30% federal ITC credits and other incentives



Canada’s new action plan mirrors the U.S. Inflation Reduction Act (IRA), which includes two new Input Tax Credits (ITCs) targeting clean energy and technology production that will remain at 30 percent until 2033 and drop to 15 percent in 2034 before being phased out entirely thereafter . 2034.

Canada’s federal government has outlined a new six-year investment tax credit that will introduce a 30 percent tax credit for solar, wind and energy storage projects commissioned until March 2034. The Clean Technology ITC was included in the Government of Canada’s 2023 budget. The day’s fiscal priorities on March 28, when Deputy Prime Minister and Finance Minister Chrystia Freeland announced the government’s 2023 federal budget.

The Canadian government is making the clean energy economy one of the three main pillars of its multi-year budget plan. The federal government’s goal is to zero out its electricity grid by 2035 with the help of tax incentives for clean energy projects over the next six years.

Canada’s Budget 2023 mirrors the IRA and includes two new ITCs focused on clean energy and technology production. In government remarks this week, it said the new plan will allow Canada to remain competitive with its southern neighbor.

In the government’s Autumn 2022 Financial Statement, it proposed a 30% refundable Clean Technologies ITC available for eligible properties acquired or brought into use on or after 28 March 2023. In the 2023 budget, the government expanded this ITC to cover geothermal energy projects in addition to solar, wind and energy storage. The ITC was also extended from the 2032 phase-out as intended in the 2022 proposal, and will remain at 30 percent until December 2033, falling to 15 percent in 2034 before phasing out entirely after 2034.

A new incentive offered by the Government of Canada is to restore the 15% investment tax credit on the capital costs of non-taxable entities. These include indigenous or tribal communities, municipal utilities and Crown corporations investing in renewable energy, energy storage, interprovincial electricity transmission and other clean energy infrastructure projects.

The ITC also applies to new hydro, wave/tidal projects, nuclear power (including small modular reactors) and reduced natural gas-fired generation.

The Clean Hydrogen ITC was announced as part of the government’s 2022 proposals. New details of the basic design elements of the hydrogen ITC include a volumetric ITC credit based on the project’s carbon intensity, measured in kilograms of carbon dioxide emissions generated per kilogram of hydrogen and meeting specified work conditions.

As illustrated in the diagram above, green hydrogen produced with the least CO2 emissions and produced with the required skilled labor can have an ITC of up to 40%, while gray or blue hydrogen, called using less carbon capture, can get between 5% and 25%. % ITC, depending on working conditions.

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David is a passionate writer and researcher who specializes in solar energy. He has a strong background in engineering and environmental science, which gives him a deep understanding of the science behind solar power and its benefits. David writes about the latest developments in solar technology and provides practical advice for homeowners and businesses who are interested in switching to solar.

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