The Budget Office of the Legislative Assembly (OPAL, in Spanish) estimates that the Treasury will lose virtually $80 million if a brand new tax credit score for the acquisition and set up of photo voltaic panels is granted, which is proposed in a legislative measure.
This knowledge corresponds to the newest report that analyzes the tax impression of House Bill 2041, which proposes to offer a brand new non-refundable tax credit score for the acquisition of kit and the price of labor for to put in photo voltaic panels and vitality storage techniques on the taxpayer’s main residence.
If the measure is accepted, OPAL estimates the tax impression for fiscal yr 2025 at $79.2 million. Additionally, because of the nature of the measure, the place taxpayers can declare this non-refundable credit score as much as a cap of $5,000 for a most interval of 5 years, the tax impression of the measure is anticipated to quantity to $811.2 million on an mixture foundation. in tax yr 2029.
“It is necessary to emphasise that the electrical energy system is just not very secure and the extra residential subscribers with photo voltaic techniques, it contributes to the soundness of the system. Surely, this incentive will assist many individuals to subsidize these techniques, as a result of $ 5,000 continues to be appreciated on this nation,” stated economist Ramón Cao.
The report highlights that, for the acquisition and set up of a photo voltaic panel tools, together with an vitality storage system, the whole price varies between $27,000 to $30,000, for a median of $28,500. These knowledge had been obtained by OPAL by means of the ultimate report of the Puerto Rico Electric Grid Resilience Study and Transitions to 100% Renewable Energy (PR100).
Regarding the rates of interest at which these loans will probably be obtained within the subsequent 5 years, the workplace estimates that they could fluctuate from a price of 9.5% for 2025, which can progressively lower till reaching ot a median price of seven.7% in 2029.
It is value mentioning that the newest financial projections revealed in March 2024 by the US Federal Reserve are used to find out the rate of interest at which this non-repayable debt will probably be issued.
“While the US is slated to chop rates of interest by practically two share factors coming into 2026, we challenge that rate of interest cuts for photo voltaic loans in Puerto Rico will probably be much less important as a result of uncertainty of the island’s macroeconomics as federal reconstruction funds dwindle,” the report reads.
Probably not accepted
When requested about the potential of realizing this challenge, the economist stated that “the most important drawback right here is just not its approval by the legislature, the issue is that it should be accepted by the Oversight Board (FOMB).
In Cao’s opinion, this report could characterize the “coffin” of the challenge, if the FOMB doesn’t conform to cease accruing the stated quantity.
For his half, the economist José Caraballo Cueto, stated that “the Fiscal Control Board has a double normal for initiatives that aren’t appropriate with the financial ideology… Looking on the historical past of a few years, it’s probably that it’s going to oppose .
Similarly, CPA Kenneth Rivera Robles, stated that it isn’t potential for the Board to approve the invoice if it doesn’t embody proposals to exchange the earnings that may not be obtained, as a result of “that is one thing that’s required within the monetary plan .
In this regard, Sylvette Santiago, FOMB press spokesperson, informed this newspaper that “the Oversight Board will probably be in a greater place to judge the measure as soon as the legislative course of is over.
Econometric mannequin questioned
On the opposite hand, Cao questions the strategy used to calculate these estimates, which on this case is Arima, a time collection mannequin that mixes three parts: autoregression, differencing and integration, and shifting common to foretell future values based mostly on previous knowledge.
OPAL acknowledged that, in response to knowledge revealed by the US Energy Information Administration (EIA) within the newest metering replace in Puerto Rico, final January there have been a complete of 109,462 residences with photo voltaic and storage techniques which is put in. Based on the information, a median of three,059 new techniques had been put in monthly after the summer season of 2022.
“I selected a useful estimate of the demand for residential photo voltaic subscriber techniques. This is as a result of, though it’s true that there was development since earlier than Hurricanes Irma and Maria in 2017, there’s a very giant inflection level in 2020. Therefore, the quantity of commentary may be very restricted to make use of this Arima method,” defined the economist.
The demand operate mannequin is an financial instrument that describes the connection between the amount of a great or service that customers are keen to purchase and the value of that services or products in a market.
Caraballo Cueto acknowledged that though this mannequin is a technique of doing it, it isn’t the one one, so he needs them to make use of a couple of estimation technique.
“It may be very tough to estimate what number of different persons are related, and greater than that, who will declare the credit score. Some prices, could also be borne by the federal government,” he stated.
Regarding this, the manager director of OPAL, Luis F. Cruz, defended using the Arima mannequin.
“However, as you talked about, the pattern is growing in recent times, by utilizing historic knowledge, this habits has been taken into the projection. Why not use the demand operate mannequin? Basically, as a result of it that mannequin is used to look outdoors. In different phrases, it signifies how an exterior variable impacts the estimate. ” Cruz identified.