Congress is about to undertake what has become a recurring ritual: addressing the extension of production tax credits (PTC) and other benefits after they have already expired.
The Senate Finance Committee is set next week to take up a tax-credit extenders package aimed at reviving a broad array of benefits that expired at the end of 2013. The House Ways and Means Committee says it will also consider tax credit legislation soon. The chances for passage and a bill getting to the president’s desk remain unknown.
Within the package of expired tax benefits are provisions that have in years past given the renewable energy sector the kind of support needed to ensure the continued growth of clean, domestically produced energy generated from the wind, the sun, biomass and other sources that offer low- to no-carbon emissions, create hundreds of thousands of jobs and enhance our nation’s energy security. It’s important to note the tax credits being sought are the same kinds of tax benefits that the oil and gas industry has enjoyed over the last century.
In the balance of the upcoming debate are a wind energy PTC that expired at the end of 2013 and had offered a credit of 2.3 cents per kilowatt-hour for the production of electricity, as well as community and distributed wind investment tax credits (ITC), the latter a more fiscally viable option – compared to a PTC ‑ for developers of smaller projects in need of financing.
Other benefits that expired Dec. 31 include a cellulosic biofuel producer tax credit of $1.01 per gallon and an additional, first-year 50-percent bonus depreciation for cellulosic biofuel production. A 30-percent credit for installation costs of alternative fuel refueling property; a biodiesel and renewable diesel credit of $1.00 per gallon; a 10-cents-per-gallon small agri-biodiesel producer credit; and a $1.00-per-gallon tax credit for diesel fuel created from biomass also expired at the end of the year.
It can only be considered encouraging that Senate Finance Committee Chairman Ron Wyden (D-OR) said he wants the tax credits to be a top priority.
On the House side, however, Rep. Dave Camp (R-MI), the chairman of the House Ways and Means Committee, is expected to take a much narrower approach to the credits. A tax reform proposal that he released earlier this year would retain the PTC for wind energy, though at a retroactively reduced rate of 1.5 cents per kilowatt-hour. His measure would also extend the wind PTC through 2024.
But Camp has proposed repealing all other credits that have been offered in recent years to other renewable energy sources. In his tax reform legislation, Camp demonstrates his bona fides as a fiscal conservative by proposing to eliminate a number of tax benefits enjoyed by the oil industry as well.
There are more than 3.4 million green jobs in the United States, many of them related to clean, renewable energy. When PTCs and ITCs were extended for 2012, the wind energy industry grew by 28 percent, setting a new installation record and supporting 80,000 American jobs. The U.S. solar market that year grew by 76 percent and supported 119,000 American jobs. Yet, because the expiration of the tax credits was imminent, by the end of 2012, renewable energy investment fell 34 percent. And the slide continued in late 2013 when, with the tax credits about to expire again, only about 70 megawatts of wind farms were connected to the grid in the third quarter of 2013, a drop of 96 percent from the same period in 2012.
Earlier this week, 29 senators from both parties wrote Wyden saying that without the tax credits for clean energy and energy efficiency, tens of thousands of jobs in the sector – including 80,000 wind energy jobs across nearly every state ‑ will be put at risk. The letter points out that the tax credits that expired spurred $25 billion in private investment in 2012, resulting in the installation of more than 13,000 megawatts of new production capacity ‑ enough to power more than 3 million American homes. In the House, 118 members joined in a similarly bipartisan letter to Speaker John Boehner (R-OH) asking for the consideration of legislation extending the credits.
The stop-and-go nature of approving tax credits and then letting them expire, only to extend them again months later, makes for an awkward legislative process that only serves to create uncertainty within the industries it impacts. By allowing the credits to expire, Congress ultimately causes a slowdown in the construction of new wind, solar or biomass facilities as developers fear the tax credits will not be there after the end of the year, dampening a major incentive to build.
Congress needs to resolve this unfinished business. Lawmakers are urged to not only adopt the tax credits, but, once and for all, give renewable energy producers and the economic, security and environmental benefits they provide the long-term, secure tax incentives they deserve.