Changing to solar power and implementing water recycling systems provide effective ways for companies in the food and beverage industry to reduce operating costs and increase cash flow, while becoming energy efficient and environmentally responsible. In particular, manufacturers and distributors of food and beverage products that occupy commercial buildings, especially buildings with large rooftops, can benefit from the installation of solar panels.
Pioneers such as Campbell’s Soup, Mars Inc., US Foods and Del Monte Foods have installed panels on many of their buildings and are reaping the benefits. Manufacturing facilities also provide great opportunities for water efficiency and conservation because the manufacturing sector is often the water utilities’ largest customer. The most common uses for water in manufacturing are product consumption, heating, cooling, cleaning, sanitation and steam generation. All these water systems should be reviewed to minimize waste and maximize efficiency.
The time and effort investment to implement programs and efficiencies offers tremendous water conservation potential. Examples of this type of conservation include the collection of rainwater or the uses of heated and cooled water throughout the manufacturing process. Energy and water systems within a well-designed facility are inter-dependent.
While advances in technology produce a better return on investment, the reduction of overall energy costs is no longer the sole challenge for food and beverage manufacturers. Clean, potable water scarcity is a regional and global concern. Climate change also affects precipitation and temperature patterns. These pattern changes have reduced the availability of freshwater.
Conservation strategies to reduce, reuse and recycle should be applied to all appropriate water systems. Water use reductions are often found by reusing water several times before discharging it from a facility.
Alternatively, many manufacturing facilities are surrounded by irrigated landscapes. Much of the water used in manufacturing is suitable for reuse for irrigation, sometimes requiring minimal treatment. An abundance of caution should be used if the water is contaminated by solvents or toxic chemicals during the manufacturing process so these pollutants do not enter the groundwater, drinking water or waterways.
Take advantage of incentives
In addition to research and development credits for creating new technology, federal and state tax credits and incentives are available to companies that install alternative energy equipment — such as solar panels and wind turbines. For example, Section 48 allows companies to quickly recapture their investments, making converting to alternative energy even more attractive.
If all the requirements are satisfied, an energy credit is provided to companies that install eligible energy properties that meet any of the following specifications:
- Generates electricity to heat or cool (or provides hot water for use in) a structure or to provide solar process heat
- Uses solar energy to illuminate the inside of a structure with fiber-optic distributed sunlight
- Produces, distributes or uses energy derived from a geothermal deposit
- Is a qualified fuel cell property or qualified microturbine property
- Combines the heat and power systems (cogenerated power) and captures the heat that would otherwise be wasted in traditional power generation and also produces less nitrogen oxide (a greenhouse gas) than most conventional systems
- Provides wind energy
- Uses the ground or groundwater as a thermal energy source to heat or cool a structure
The federal government allows taxpayers a 30 percent investment tax credit on the net system cost, which can be used to offset the regular and alternative minimum tax. Any unused portion of the credit can be carried forward to future years. In addition, certain states allow tax credits against income and property taxes. Solar panel installation costs can depreciate across five years using an accelerated depreciation method against the approximately 25-year determined lifespan of a solar panel.
Other rebates and incentives are available to businesses based on the production levels of solar power, cogenerated power and/or wind power. Many organizations receive payments from their local utility providers because of "net metering" — the process of putting energy back into the power grid when the solar panels produce more than the building uses. Rebates and incentives vary from state to state, but they can be predetermined by the installer before purchase.
Is solar energy right for you? While alternative energy solutions are not for everyone, they are worth considering and often provide a strong return for a minimal investment. If facility owners and managers think solar energy is an option for them, they should conduct research and contact a professional to discuss the applicable tax credits available in their areas.
Vincent Paolucci is a tax partner and CPA at WeiserMazars. He has more than 30 years of experience in public accounting, specializing in public and middle market companies, corporate closely held businesses, individuals and partnerships. He has extensive expertise in the manufacturing and distribution market segment, and a substantial background serving the real estate, health care, retail, apparel and medical equipment industries. He can be reached by email at [email protected] or by phone at 516-282-7265.
Al Colanero is senior tax manager and CPA at WeiserMazars. He has more than 20 years of experience delivering tax consulting, advisory and compliance services to the manufacturing, distribution, service and real estate industries. Working with a diverse client base of closely held and public companies, he has designed and implemented tax efficient strategies addressing business sales, mergers and acquisitions, real estate development, estate and business succession planning. He may be reached by email at [email protected] or by phone at 516-620-8551.