This is a per-kilowatt-hour tax credit for electricity generated by wind power, landfill gas, biomass, hydroelectric, geothermal electric, municipal solid waste, hydrokinetic power (i.e., flowing water), small hydroelectric, tidal energy, wave energy and ocean thermal energy resources and sold by the taxpayer to an unrelated person during the taxable year.

Few developers can utilize the full tax credit benefits of a renewable energy project. Most developers “sell’ these benefits to institutional investors who can use the Federal tax credits along with the depreciation and other losses. This type of “sale” is done by the admission of a “silent” partner into the partnership or limited liability company that is developing the project. The investor partner makes a capital contribution to the project in exchange for an allocation of the tax and other benefits. After the 5-year tax credit period, the investor typically exits the partnership and full ownership of the project reverts back to the developer.