Green Per Square Foot

Introduction to project incentives July 17th, 2014


The upfront cost of retrofitting building systems and equipment is often a significant barrier for getting efficiency projects done. In most cases, and initial investment pays off over several years through reduced cost savings. Incentives can reduce the upfront cost, and result in more projects.

  • For many projects, incentives are essential to boost return on investment to acceptable levels
  • Incentives are time-sensitive, change frequently, and may be available on a “first come” basis
  • Beyond standard (aka, “prescriptive”) measures, custom incentives may be available for your project

Types of Incentives

A variety of federal, state, local, utility, and non-profit incentives are available to help property owners and users offset a portion of the upfront costs. The most common incentives for efficient building retrofits are summarized below:


Rebate Programs

  • Lower the upfront cost for efficiency retrofit projects by reducing the upfront cost
  • Cover a range of technologies and funding levels
  • Are often time-sensitive or have limited availability
  • Typically administered by local utilities

Performance-Based Incentives (PBIs)

  • Provide cash payments for renewable energy generation (based on the number of kilowatt-hours or BTUs produced)
  • Typically offered by state governments or utilities
  • Also known as production incentives, or feed-in tariffs

Grant Programs

  • Lower the upfront cost for efficiency retrofit projects
  • May focus on a single technology, or a range of technologies
  • Often require a competitive application to receive funding
  • Typically administered by federal, state, or local governments

Green Building Incentives

  • Promote sustainable construction
  • Often involve reduced or waived fees for building permits
  • Frequently tied to building certification standards (e.g., LEED, ENERGY STAR, Green Globes, etc.)
  • Typically offered by cities and counties


Property Tax Incentives

  • Include exemptions, exclusions, abatements and credits
  • Exclude the value added by a renewable energy system from the building’s valuation for taxation purposes
  • Offered by local governments in accordance with state law

Corporate Tax Incentives

  • Include tax credits, deductions and exemptions
  • Reduce the effective cost of performing an efficiency retrofit
  • Offered by federal and state governments

Sales Tax Incentives

  • Exempt some energy efficiency and renewable systems from state sales/use tax (or provides a refund)
  • Some states offer established “sales tax holidays”, typically in effort for short period (one or two days)
  • Reduce the effective cost of performing an efficiency retrofit
  • Offered by state governments

Personal Tax Incentives

  • Include income tax credits and deductions
  • Credit/deduction varies and is often capped
  • Credit may include carry-forward provisions or be spread over multiple years
  • Offered by many state governments (also federal government)


Loan Programs

  • Provide low- or zero-interest financing for systems and equipment
  • Loan terms are typically 10 years, or less
  • Typically available from state governments or utilities

PACE Financing

  • Property-Assessed Clean Energy (PACE) financing is used to fund retrofit projects using the property’s taxes
  • Amount borrowed is typically repaid over a period of years via a special assessment on the owner’s property
  • Offered by local governments in accordance with state law

Additional Incentives and Regulation

Beyond project-related incentives, many states and municipalities have enacted legislation related to green buildings. Below is a summary of some of the most common, courtesy of DSIRE.

Appliance/Equipment Efficiency Standards
The federal government, along with many states, has established minimum efficiency standards for certain appliances and equipment. The retail sale of appliances and equipment that do not meet the established standards is prohibited.

Building Energy Codes

State laws governing energy standards for commercial and/or residential construction. Most states and local governments use International Energy Conservation Code (IECC), developed and published by the International Code Council (ICC); or ASHRAE 90.1, developed by the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE).

Energy Standards for Public Buildings
A separate set of building energy standards for government buildings.

Equipment Certification Requirements
Policies requiring renewable energy equipment to meet certain efficiency standards.

Generation Disclosure
Some states with de-regulated energy markets require electric utilities to provide their customers with specific information about the electricity that the utility supplies, including the utility’s fuel mix percentages and emissions statistics.

Green Power Purchasing Policies
Commitments by government entities, businesses, residents, schools, nonprofits and others to buy electricity from renewable resources.

Mandatory Utility Green Power Option
In de-regulated energy markets, states may require electric utilities to offer their customers the option to buy electricity generated from renewable resources. The utility may either generate its own green power, or it buys renewable energy credits (RECs) from a provider certified by a state public utilities commission.

Net Metering
For electric customers who produce their own electricity, net metering allows the customer to sell electricity back to the grid when generation exceeds the customer’s consumption.

Public Benefit Funds
Sometimes called a “system benefits charge,” public benefit funds (PBFs) ensure continued support for renewable energy, energy efficiency and low-income energy programs. These funds are usually supported through a very small surcharge on electricity consumption.

Renewables Portfolio Standards (RPS)
State or federal requirements for utilities to use or procure renewable energy or renewable energy credits (RECs) to account for a certain percentage of their retail electricity sales.

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Efficient buildings – from insight to action.


Posted by in Property User Support, Sustainability Education