Manufacturers evaluating automation upgrades, control system modernization, or energy-efficiency improvements may have opportunities to improve project ROI through available tax incentives, deductions, rebates, or depreciation benefits.
For most manufacturers, the reason for considering an automation project is much more practical. An aging PLC platform needs to be replaced. Obsolete hardware is becoming harder to support. A refrigeration or process cooling system could operate more efficiently. A production line needs upgraded controls or additional automation.
The need may be clear, but finding room in the capital budget can be more difficult. However, manufacturers planning a significant automation or modernization project may want to involve their qualified tax and financial advisors early to determine whether any available programs apply.
Start With the Operational Case
Automation projects should make sense from an operational standpoint first. Manufacturers invest in modernization projects to:
- Improve reliability
- Reduce downtime
- Increase production capacity
- Improve product quality
- Address obsolete equipment
- Improve operator visibility
- Reduce maintenance challenges
- Lower energy consumption
If a project also qualifies for available tax incentives, rebates, or depreciation benefits, those programs may improve the financial justification for the investment. The specific benefit will vary significantly by project, company, location, and current tax rules.
Understanding the Opportunity
Manufacturers may hear their tax advisors discuss Section 179, bonus depreciation, Research & Development tax credits, utility incentives, or state and regional programs. The requirements for these programs vary, and not every automation project will qualify. The actual tax treatment depends on the project, the business, and the rules in effect at the time, which is why qualification should be reviewed by a tax professional rather than assumed during project planning.
What Types of Projects May Be Worth Discussing?
Energy incentives are not limited to renewable energy projects. Controls and automation can affect how equipment operates and how much energy it uses. Depending on the application, projects involving the following areas may be worth discussing with a qualified advisor:
- PLC and HMI upgrades
- Control system modernization
- Variable Frequency Drive (VFD) installations
- Motor control improvements
- Process cooling and refrigeration controls
- Energy monitoring systems
- Robotics and material handling automation
- Industrial control software
That does not mean a project automatically qualifies for an incentive. Equipment, project scope, installation details, location, and the specific program all matter.
A Practical Example: Using VFDs to Reduce Motor Speed
One of the more straightforward energy-saving opportunities we see involves Variable Frequency Drives. A motor does not always need to run at full speed, and if the process allows it, a VFD can slow the motor when full output is not required. This can reduce energy consumption while still meeting the needs of the process.
Depending on the application, that approach can be used with pumps, fans, and material handling systems. In one proposed wastewater application, Cornerstone evaluated two effluent pumps that were frequently starting and stopping to maintain process level. Based on a sample of operating data, the existing setup was estimated to use approximately 31.1 kWh, while a proposed VFD-controlled configuration was estimated at approximately 27.4 kWh, a reduction of at least 12%.
The estimate did not include potential benefits from reducing frequent motor starts or improving process consistency. Because the calculation was developed during project evaluation, the 12% figure represents an estimated energy reduction rather than a measured post-installation result. Even at that stage, the analysis showed how a controls change could potentially reduce energy use while improving operation.
Installing a VFD does not automatically make a system more efficient. The process has to allow the motor to run at reduced speed without creating another problem elsewhere. When it does, reducing motor speed may provide meaningful energy savings.
Why It Makes Sense to Ask Early
If a manufacturer wants to investigate possible incentives, it makes sense to do it while the project is being planned. Some programs may require information such as:
- Equipment specifications
- Project costs
- Engineering documentation
- Energy-use information
- Installation dates
- Information about the equipment being replaced
Those details are generally easier to collect while the project is being scoped and engineered. Cornerstone can help develop engineering descriptions and define the controls scope for a project. For straightforward controls upgrades where the scope is already understood, this may be part of the normal quoting process. More detailed engineering or scope development required specifically for an incentive application may involve additional engineering time at Cornerstone’s standard rates.
An incentive may not turn a poor project into a good one. But if the upgrade is already needed, any applicable financial benefit may make the decision easier to justify.
Look at the Whole Project
The return on an automation project is rarely tied to a single number. Replacing obsolete controls, for example, may make replacement parts easier to obtain while also improving diagnostics and reducing troubleshooting time. An HMI upgrade may give operators clearer information when something goes wrong, while a VFD application may save energy and give the plant better control over a process.
A controls upgrade may also help reduce downtime, increase capacity, lower maintenance costs, improve safety, or make equipment easier to support. When evaluating a project, it is worth considering these operational benefits alongside any potential energy savings, incentives, or tax benefits.
Where Cornerstone Automation Fits In
At Cornerstone Automation, our focus is the controls and engineering side of the project. We help manufacturers replace obsolete control systems, improve process performance, troubleshoot plant-floor problems, and find practical ways to make equipment run better.
Sometimes that means replacing a PLC or HMI. Sometimes it means adding better alarming or diagnostics. In other cases, it may involve a VFD, process cooling controls, or another change that allows equipment to operate more efficiently.
We are not tax advisors, and we cannot determine whether a project qualifies for a particular credit, deduction, or rebate. What we can do is help define the project, develop the controls scope, explain how the system will operate, and provide relevant engineering information about the proposed improvement. Manufacturers can then review the financial side with the appropriate advisors.
Final Thoughts
If an automation or controls project is already being considered, there is one more question worth asking: Are there any tax incentives, rebates, or other programs that could apply to this project?
Before moving forward with your next major upgrade, consider whether incentive programs should be part of the conversation.
If a controls upgrade or modernization project is on your radar, we’d be glad to talk through the options and help you determine what makes sense for your facility.