Renewable Energy Production Credits Face Renewed Uncertainty

Given the continued dysfunction of Washington it’s not surprising that Congress has yet to reauthorize Production Tax Credits for a wide range of renewable energy development. Historically, lawmakers wait until the last possible moment to extend production and investment tax credits (and in some years, past the last possible moment) and usually for only a year, so the process repeats the following year.

The stop-and-go nature of this awkward legislative process only serves to create uncertainty within the industries it impacts; usually causing 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.

Set to expire Dec. 31 of this year is a wind energy production tax credit of 2.2 cents per kilowatt-hour for the production of electricity, and a community and distributed wind investment tax credit, the latter a more fiscally viable option for developers of smaller projects than a production tax credit. A cellulosic biofuel producer tax credit of $1.01 per gallon and an additional, first-year 50-percent bonus depreciation for cellulosic biofuel production facilities will also end Dec. 31.

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 are also at risk of expiring at the end of the year.

There has been serious talk of lawmakers undertaking major reform of the U.S. tax code, an initiative that was launched with big fanfare earlier in the year, but has since fallen down the priority list as Congress engages in the partisan haggles over broader economic issues like the budget and the debt ceiling.

Renewable energy proponents had hoped a long-term extension of PTCs and ITCs could be included in any tax reform legislation that is adopted. But House Ways and Means Committee Chairman Dave Camp, R-Mich., who said earlier this year that his panel would mark up tax reform legislation by October, only to be delayed by the government shutdown, now says he hopes to have proposed legislation sometime before the end of the year. Even then, however, mark up would not be expected until 2014.

Senate Budget Committee Chairman Max Baucus, D-Mont., also has scaled back expectations of action by his panel, now saying only that some discussion drafts of legislation will be available before Dec. 31.

Renewable energy advocates have been discouraged from overtly pushing for an extension of the tax credits for their respective technologies, with some on the Hill fearing it would raise questions about the viability of tax reform. But the year is now fast coming to a close and many believe the best hope for reviving the benefits is a package of tax credit extenders that might be included in a budget deal that is expected to come around the middle of next month.

Regardless of the legislative vehicle, and in the continued absence of a long-term, comprehensive energy policy, Congress should extend these tax credits for a number of years to allow their benefits to help these still relatively new technologies evolve into a mature industry.

There are an estimated 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. Likewise, the U.S. solar market grew by 76% and supported 119,000 American jobs. However, because the expiration of the tax credits was imminent, by the end of 2012 year, renewable energy investment fell 34-percent. And the slide is continuing this year: with the PTCs 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, says the American Wind Energy Association.

Policymakers should act promptly to eliminate this policy uncertainty and take advantage of any opportunity to enact thoughtful, long-term renewable energy tax policy, including tax credits authorized over several years, that will help ensure U.S. leadership in renewable energy technology, create jobs and offer the nation a secure path to a clean energy future.

This entry was posted in Policy and tagged , , , , , , , , , , , , . Bookmark the permalink.

Leave a Reply