Making sense of ‘going green’
Renewable energy systems are new for
many accountants, and there are many factors that affect return on investment. The
huge national interest in renewable energy
has produced a lot of hype and misinformation. Claims are being made about payback
times, suitability of use, life spans, how a
material was procured and positive impacts
on the environment that just don’t hold up
under scrutiny. Both residential and business clients of accounting firms are going to
need more help in preparing calculations and
business plans for renewable energy features
in the future.
How does a CPA sort all of this out?
One CPA’s exploration of the benefits of renewable energy
When CPA Tom Klismith
began the decision process to
place solar electric panels at
his office in Plover, Wis., he did
his homework. Initial cost, tax
benefits, incentives and depre
ciation were just a few of the
things he needed to consider.
By ThomAs J. GIrolAmo
cooling all require careful calculations from
experts intimately familiar with the particular
equipment, the environment it will be used
in, and how it is going to used.
There are experts in all areas of renewable
energy, as well as other areas of sustainability.
Klismith hired a local expert in photovoltaic
systems to find the right type of system that
would benefit him. Right away Tom received
a real shock in the fact that the cost of installing solar panels would run $145,000. A quick
calculation showed that the amount of the
electricity produced would never pay back
the cost of the equipment. However, Tom was
aware of some tax breaks and incentives that
would change the calculations.
Klismith took advantage of the federal tax
credit that applies to certain improvements
in energy conservation. As of Jan. 1, 2009,
the federal tax credit for qualified renewable
energy features is 30 percent. He also took
advantage of a Wisconsin program through
Focus On Energy, a utility-funded agency
that provided a direct rebate for the whole
project that amounted to $35,000.
Calculations of depreciation and federal
tax credits reduced the cost of Klismith’s
system to $63,000 at the end of the first year,
down to $46,000 at the end of the five-year
solar equipment depreciation period.
Because businesses can depreciate capi-
tal improvements, an additional tax savings
is realized for both state and federal taxes.
Residential property owners need to be made
aware of this in the initial stages of planning.
Placing their renewable energy equipment
into a business, farm or rental may result in
significantly shortening the payback period
because of the ability to depreciate. There
are programs, however, that are just for resi-
dential property owners that may exceed the
value of depreciation.
Thomas J. Girolamo is a speaker, consultant, sustainable landscaper and author of
Your Eco-Friendly Yard. Reach him at (715)
344-2817 or firstname.lastname@example.org.
A Parallel Generation-Solar Agreement with
Wisconsin Public Service provides $0.25 for
each kilowatt-hour that Klismith’s system
produces. He sells all of the electricity he
produces to the utility at that higher rate and
buys electricity back at the lower, regular rate
of about $0.115 per k Wh.
With the help of his solar expert, Klismith
calculated that he will produce enough electricity in eight years to pay back the initial
investment. With a service life of 20 or more
years for the equipment, he will have at least
12 years of nearly free electricity production.
Not all renewable energy systems are as
easy to calculate payback based on energy
produced as photovoltaic, however. Photovoltaic ratings are standardized at 1 kilowatt
per square meter of panel at 25˚C. Small
wind turbines that might produce as much
electricity as Klismith’s system do not have
a standardized rating at this time, so it’s difficult to compare different types of wind turbines and the amount of electricity that will
be produced from an individual unit. Wind
generators, solar hot water systems, passive
solar heating, and geothermal heating and
WHAT ELSE IS BEING DONE?
Many businesses are going “green” because
there are true benefits in doing so. Conservation through lighting and insulation upgrades
can have an immediate affect on comfort and
utility costs. Permeable concrete is being
used more for sidewalks, parking and patios
so that water can be drained from a site without allocating additional space for retention
ponds. Sustainable landscapes can provide
low-maintenance green space that helps cool
buildings, reduces runoff, improves aesthetics and can even provide an extra employee
benefit of garden space at work.
Renewable energy and all things “green”
offer new and exciting ways for accountants
to be involved in the sustainability movement. As more people look at these options,
there will be a greater need to explain the
numbers in ways that people can understand.
CPAs will want to be proactive about assisting
their clients early in the planning stage for
renewable energy and sustainable options,
because this type of planning will be critical
to the financial success of these projects.
“I’m very interested in the environment
and wanted to do a project that would make
a difference to people and the planet,” said
Klismith. “I also wanted to draw on my accounting and financial management skills
in a way that was true to my professional
beliefs. I have been able to create benefits
for the environment, for myself and for the
bottom line.” AT
Plante & Moran goes green – and Gold
cruit the best and brightest. While there were
economic considerations, we realized quickly
that the benefits outweighed the costs.
Plante & moran reached cap
acity at our downtown Grand
rapids, mich., location two
By Kelly sPrINGer
Anticipating further growth, and on the
heels of the office’s 20th year as part of the
Grand Rapids community and the firm’s 85th
year in business, we decided to relocate our
Grand Rapids facility a few blocks north.
Given the firm’s commitment to sustain-
ability, it was a natural solution to sign a
long-term lease with The Christman Co., a
construction-management expert skilled in
erecting sustainable buildings. This resulted
in a state-of-the-art, 34,000-square-foot space
that recently received LEED, or Leadership
in Energy and Environmental Design, Gold
certification for commercial interiors.
WHY BE GREEN?
Plante & Moran occupies two of the building’s
five floors and shares the building with owner
and builder Christman, which broke ground
on the $11.5 million building in the fall of
2007 and completed the project one year later.
From the beginning, the facility was designed
and built to seek LEED certification.
FEATURES AND FUNCTIONALITY
Our office received LEED certification for our
sustainable use of energy, lighting, water and
materials, as well as incorporating a variety of
other sustainable strategies.
The office space includes energy-efficient
heating, ventilation, cooling, lighting and
water systems to minimize environmental
impact. During the first year of occupancy,
our office saved about 42 percent on water
and sewage through the use of water-efficient
plumbing fixtures. About 75 percent of the
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