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Energy Efficiency Could be New Wave for Connecticut Manufacturers

February 25, 2013

Tony J. Switajewski, CPA

The Connecticut manufacturing sector is edging toward more efficient forms of energy to provide power, heat and cool buildings and reduce the cost of doing business.

Half of the respondents in a recent survey, conducted by BlumShapiro and the Connecticut Business and Industry Association (CBIA), said they are already embarking on energy saving efforts, or will be within a year. Although the use of alternative energy forms such as solar, was relatively small in the past two years – amounting to just shy of 4% of respondents – that number is expected to double in the next two years. This increase reflects a growing awareness of advances in alternative energy and how those advances relate to the need for cost savings.

One of the biggest criticisms of solar energy in the past was that the panels and associated hardware would not last long enough to pay off the initial investment through long-term energy savings. However, while some solar industry experts now say that a 50-year lifetime is possible, some companies are currently advertising solar arrays with a 25-year warranty, still far in excess of what is needed to recoup their cost.

But there is good news on the alternative energy front. There are many state and federal incentives to convince businesses to start looking into alternative energy sources, and solar is foremost among those sources to benefit from these incentives. Even local communities are involved in helping local businesses reduce their operating costs through use of alternative energy such as solar.

Connecticut, for instance, has solar energy incentives to attract business to the state and to keep existing businesses there. These include solar energy grants, abatements, loans and rebates. In addition, Connecticut exempts from Connecticut sales and use taxes any sales of solar energy electricity generating systems, passive or active solar water or space heating systems, and geothermal resource systems.

At the federal tax level a tax credit is available for solar installation which is equal to 30% of the expenditures. Eligible solar energy property includes equipment that uses solar energy to generate electricity, to heat or cool (or provide hot water for use in) a structure, or to provide solar process heat.

Tax codes have been flexible and can change from year to year. It is advisable to meet with your tax and financial advisors and explore in depth how the tax breaks and financial incentives for solar energy can benefit your business.

In addition, many Connecticut manufacturers responding to the BlumShapiro/CBIA survey say they are making efforts to reduce their energy costs by other means. More than 12% of respondents said they increased their use of natural gas in the past year, and another 15% intend to switch to or increase natural gas usage in the next two years.

Although it is a fossil fuel, use of natural gas has vast advantages over petroleum products such as heating oil and coal. The federal Environmental Protection Agency says that, when compared to other fossil fuels, natural gas is the cleanest and least polluting. Coal and oil contain far more carbon, nitrogen and sulfur than natural gas, and produce pollutants in some categories that are thousands of times higher than natural gas. For instance burning coal or oil leads to far higher levels of carbon emissions, nitrogen oxides and sulfur dioxide, and they also release particulates such as ash.

There is a myriad of reasons for manufacturers to turn to alternative energy sources, whether they be renewable like solar or wind power, or natural gas in place of other fossil fuels. Changing to these energy sources can reduce greenhouse gas emissions, help reduce smog, improve air quality and, best of all, cost far less than more traditional energy sources.

Keeping costs in check is one of the biggest challenges now facing businesses in Connecticut and across America. Labor, health insurance and materials can all be volatile sources of increased costs, and offsetting escalating expenses is often the key to staying afloat.

Connecticut's manufacturing sector has been creative and proactive in finding ways to provide for its energy needs in a time of escalating business costs. The quest for more efficient and cleaner energy clearly is building momentum, and while it certainly can produce savings for the present and near future, the increased need for sustainable and relatively inexpensive energy sources could itself become another segment of the Connecticut manufacturing community.

Tony J. Switajewski is a partner with BlumShapiro, the largest regional accounting, tax and business consulting firm based in New England, with offices in Connecticut, Massachusetts and Rhode Island. The firm, with 340 professionals and staff, offers a diversity of services which includes auditing, accounting, tax and business advisory services. In addition, BlumShapiro provides a variety of specialized consulting services such as succession and estate planning, business technology services, employee benefit plans, litigation support and valuation and financial staffing. The firm serves a wide range of privately held companies, government and non-profit organizations and provides non-audit services for publicly traded companies.

Disclaimer: Under U.S. Treasury Department guidelines, we hereby inform you that (1) any tax advice contained in this communication is not intended or written to be used, and cannot be used by you, for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service (or state and local or other tax authorities), and (2) no part of any tax advice contained in this communication is intended to be used, and cannot be used, by any party to promote, market or recommend any transaction or tax-related matter(s) addressed herein without the express and written consent of Blum, Shapiro & Company, P.C.


Advisors | Auditors | Consultants | CPAs - Blum Shapiro is one of the premier public accounting firms in the northeast and a Top 100 CPA Firm in the U.S. Our professionals serve businesses, individuals and organizations in Boston (MA), Hartford (CT), Cranston (RI), Shelton (CT) ,Quincy (MA) and Newton (MA) with audit, tax and business consulting services. Our firm has developed practice areas in automotive, construction, education, government, healthcare, hospitality, manufacturing, nonprofit organizations and professional service firms. New Haven CT, Fairfield CT, Norwalk CT, Waterbury CT.