PURPA had two components that were critical for renewables: access and pricing.
Regarding access, the law required electric utilities to interconnect to 'small power producers', which included independent generators relying upon either renewable sources or co-generation.
As for standardized pricing, the rules developed for the new law required utilities to purchase power from the independents at what was termed the 'avoided cost' of the utility — the cost the utility would face if it were to build the new generation plant itself or purchase it on the market from another source.
In addition, the National Energy Act included two other provisions that were important fiscal incentives to renewables. The first provision was investment tax credits of 40 per cent for residential wind and solar energy systems, and 10 per cent for business investments in wind, solar and geothermal energy systems, later increased to 15 per cent in 1980.1 These tax credits could be taken on top of a 10 per cent general investment tax credit. The second National Energy Act provision was accelerated depreciation recovery of five years for investments in wind, solar and geothermal energy technologies.
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