Incentive Programs Make PC Power Management a No-Brainer

Incentive Programs Make PC Power Management a No-Brainer

Across North America, many utility providers will partially or fully fund the costs of a PC power management project or a server reduction program. In addition to these energy rebates, the U.S. government passed a law a year ago giving tax breaks to businesses, which lets companies of all sizes immediately offset 2011 investments in new software and equipment. However, time is running out.

So what are you waiting for?

The idea that you can control and reduce energy consumption by actively power managing your IT estate has become very attractive, and claiming energy rebates on top of this is a no-brainer when you consider that price hikes seem to be an inevitable recurring event. Apart from the obvious cost savings, there are also the green credentials that can be gained from saving energy and reducing CO2 emissions.

In these economically hard times, business tax breaks are also great incentives for companies to initiate efficiency programs, recognize tax advantages and get 100 percent depreciation immediately. The time to act is now though. This opportunity only exists until the end of 2011; if you wait until 2012, this advantage is cut in half.

Still hesitating? Although applying for energy rebates may seem like a long, drawn-out process, in reality energy providers want to help you claim the rebate. And if you engage and collaborate with your energy provider from the get-go, you will have a smooth ride in claiming your rebate.

If you collaborate with the utility, you will receive guidance on efficiency decisions and ensure you know the available payment plans and how long the incentive program will last. (But beware: Some programs may only be active for 12 months and even then, this may change due to the availability of program funds) If you have completed a project without the utility provider’s involvement, you may find it harder to justify the need for their support and may not qualify for funding.

“Those companies that understand the benefits must ensure they engage with us early in their claim process,” says Joyce Kinnear, manager of utility marketing services for the City of Palo Alto. “If they don’t, they might not qualify for a rebate.”

Mary Medeiros McEnroe, the public benefit program manager for Silicon Valley Power agrees: “Most programs require pre-approval to ensure they qualify.” The Californian Energy Commission regulates the rebates programs for all the utilities in the State and needs assurance that the rebates are only given to new initiatives.

“Probably the biggest challenge is the lack of time and staff at companies to implement power management programs,” adds Medeiros McEnroe. “There’s still a lot of opportunity for companies to apply but generally a lack of internal resource to carry it out.”

You should also be able to rely on your power management provider for support and advice as they will have helped other companies navigate the rebate process.

What Do You Get with a Rebate?

Utility incentive programs fund anything from 25 percent to 70 percent of qualifying efficiency projects or offer cash rebates for customers who install new, energy efficient IT equipment or cooling systems.

By deploying an Efficient IT solution, energy rebates shorten the payback on your energy efficiency investments and help improve your company’s bottom line. They are aimed at encouraging companies to construct energy efficient data centers, to consolidate computing, storage and networking resources or to run their PC estate more efficiently.

Rebates also solve the budget problem of having to “spend money to save money”, by covering a large proportion (and sometime all) of the upfront investment costs of an energy efficiency project.

Will It Lower Your Capital Costs?

The government’s tax breaks can lower the average cost of capital by more than 75 percent. Through the temporary 100 percent expensing, companies can pursue a broader range of investments through to the end of this year. The U.S. Treasury Department’s bill [PDF] enables businesses to receive deductions up front that they would otherwise receive over several years.

Under the previous law, a business that makes $1 million of additional investment in new equipment would typically have a seven-year recovery period as the business would only be able to deduct a fraction of the investment each year and reduce its taxes in the first year by $50,000.

Now, with immediate 100 percent expensing, that same business could deduct every cent of the $1 million in the first year — reducing taxes to the tune of $350,000. If you delay investment into 2012 however, the bill provides for a reduced 50 percent bonus depreciation.

It’s important to remember the following to be eligible for your 100 percent depreciation bonus:

  • The PC power management equipment must be new. In other words, the original use of the equipment must commence with the taxpayer claiming the depreciation bonus after September 8, 2010 and before January 1, 2012.
  • The equipment must be depreciable under Modified Accelerated Cost Recovery System (MACRS) and have a depreciation recovery period of 20 years or less.
  • The equipment must be purchased between September 8, 2010 and before January 1, 2012.
  • The equipment must be placed in service before January 1, 2012.

Last Chance

As you can see, the time to act is now. While the carrot is swinging within reach, it is worthwhile taking a bite. You may be wavering with your decision but it’s unlikely you’ll see such generous offers in the future — in fact the 100 percent depreciation (in the tax benefits) will halve to 50 percent on January 1, 2012 and energy rebates will only be on offer while the program funds are still available.

With the rebates offsetting the capital outlay now there is no reason to wait. You will see the immediate advantages, reduce your costs and prepare your business for a sustainable future.

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