What property qualifies
To qualify, in addition to other limitations, clean electricity property:
- must be equipment that is situated in and intended for use exclusively in Canada
- must not have been previously used, or acquired for use or lease, for any purpose before acquisition by the qualifying entity
In addition:
- property that is part of a project that started construction before March 28, 2023, is not clean electricity property (for this purpose, construction does not include getting permits or regulatory approval, conducting environmental assessments, community consultations or impact assessment studies, or similar activities)
- if a major project is undertaken in discrete phases for bona fide business or engineering reasons, the CRA may determine that each phase is a separate project for the purposes of determining when a project started construction
If you lease the clean electricity property to another person or partnership
If you lease the property to another person or partnership, the property must meet additional leasing requirements.
The property must be both:
- leased to a qualifying entity or a partnership where all the members are qualifying entities
- leased in the ordinary course of carrying on a business in Canada by the qualifying entity whose principal business is any or a combination of the following:
- selling or servicing property of that type;
- leasing property;
- lending money;
- purchasing conditional sales contracts, accounts receivable, bills of sale, chattel mortgages or hypothecary claims on movables, bills of exchange or other obligations representing all or part of the sale price of merchandise or services.
Eligible clean electricity property
The Clean Electricity ITC is available for investments in the following types of clean electricity property:
- qualified natural gas energy equipment requires a qualified natural gas energy system evaluation to be completed and issued by NRCan and has specific emissions intensity reporting requirements that are not applicable to other types of clean electricity property (for more information, go to Submitting your qualified natural gas energy system plan and Your reporting responsibilities).
- certain equipment that is part of a hydro-electric installation of any rated capacity
- equipment used to generate electricity from solar, wind, and water energy (excluding a test wind turbine as described in subsection 1219(3) of the Income Tax Regulations)
- concentrated solar energy equipment that is part of a system used solely for the purpose of generating electrical energy, exclusively from concentrated sunlight
- nuclear energy property
- equipment that
- is used exclusively for the purpose of generating electrical energy, or a combination of electrical energy and heat energy, solely from geothermal energy
- is part of a system that exports more electrical energy than heat energy on a net basis, determined annually, and does not extract fossil fuels for sale
- is described in subparagraph (d)(vii) of Class 43.1 in the Income Tax Regulations
- waste biomass electricity generation equipment that is part of a system that exports more electrical energy than heat energy on a net basis, determined annually
- fixed location electrical energy storage property or pumped hydroelectric energy storage property, excluding equipment that uses any fossil fuel in operation
- qualified interprovincial transmission equipment
- property that is incorporated into another clean electricity property as part of a refurbishment of the other property, where, upon completion, the other property continues to be clean electricity property
Technical guidance for clean electricity property
Guidance on clean electricity property (other than qualified natural gas energy equipment)
In the coming months, NRCan will publish the system evaluation process and guidance documents related to qualified natural gas energy systems.
Additional tax incentives
Additional tax incentives are available for clean electricity property that is also included in Class 43.1 and 43.2 of the Income Tax Regulations. These tax incentives could include an accelerated capital cost allowance.
Refer to: Tax incentives for Class 43.1 and 43.2 property
Determination of capital cost
The capital cost of property generally means your cost of acquiring the property and includes:
- legal, accounting, engineering, or other fees incurred to acquire the property
- site preparation, delivery, installation, or testing costs, or other costs incurred to put the property into service
- in the case of a property that you manufacture for your own use, material, labour, and overhead costs reasonably attributable to the property, but not any profit which might have been earned had the asset been sold
The capital cost of clean electricity property must be reduced by:
an amount of any government assistance or non‑government assistance you received in or before the tax year in which the property became available for use
an amount you are entitled to or can reasonably be expected to receive and that would be government assistance or non‑government assistance if you received it in the year
Unless the amount received or receivable is from:
- Canada Infrastructure Bank (for property that is acquired and becomes available for use from December 16, 2024)
- Canada Growth Fund Inc. or a subsidiary wholly-owned corporation of Canada Growth Fund Inc. (for property that is acquired and becomes available for use from November 4, 2025)
Where an amount of assistance that was applied to reduce the capital cost of a clean electricity property in a previous tax year is repaid or is no longer expected to be received in a tax year, that amount may be added to the capital cost of a separate clean electricity property that is deemed to have been acquired in that tax year for the purpose of determining the Clean Electricity ITC, unless that property (or another property that incorporates the property) is converted to an ineligible use, disposed of, or exported from Canada.
The capital cost of clean electricity property does not include:
- expenditures incurred for a preliminary work activity
- preliminary work activity means an activity that is preliminary to the acquisition, construction, fabrication, or installation of property, including but not limited to a preliminary activity that is:
- obtaining a right of access to a project site, permits, or regulatory approvals (including conducting environmental assessments)
- performing front-end design or engineering work, including front-end engineering design studies or process engineering work for development of the project, including collecting and analyzing site data; calculating energy, mass, water or air balances; simulating and analyzing the performance and cost of process design options; selecting the optimum process design; and conducting feasibility studies or pre-feasibility studies
- clearing or excavating land, except excavation directly related to the installation of clean electricity property
- constructing a temporary access road to the project site
- drilling of a well
If any part of the capital cost of a qualifying entity’s particular clean electricity property is unpaid on the day that is 180 days after the end of the tax year which the property became available for use, then such unpaid amount is not included in the cost of that property in the tax year.
When the unpaid part of the cost is paid, it is added to the capital cost of a separate clean electricity property that is deemed to be acquired at the time it is paid, unless that property (or another property that incorporates that property) is converted to an ineligible use, disposed of, or is exported from Canada.