This Week's Gains Must Be Maintained with an Eye toward the Long Term

Renewable energy advocates got some good news from Washington this week when Congress finally adopted legislation that not only veered the nation away from the tax-hiking, recession-inducing “fiscal cliff,” but also included provisions that will help sustain the growth of clean, sustainable energy in this country.

And while the White House and Congress should be commended for their efforts in maintaining the fiscal tools crucial to renewable energy development, the vote also marks the need by renewable energy interests to sustain over the long term the momentum expected to be generated in the short term by this week’s legislative action.

The American Taxpayer Relief Act that was widely adopted by the Senate (89-8), but passed by the House (257-167) only after considerable arm-twisting, extends through 2013 a number of expired Production Tax Credits (PTCs). The measure also makes a critical change in criteria for PTC eligibility by applying the credit to a wide variety of renewable energy projects having started construction by the end of the year. Previously, the credit applied only to those that have actually been built, gone online and are producing energy by year’s end.

Among the sectors benefiting from the extended PTCs, the wind energy industry has probably received the most attention. The 2.2-cents-per-kilowatt hour tax credit now goes to electricity produced for a 10-year period from wind facilities under construction by the end of 2013. The industry says the extension will save 37,000 jobs and millions of dollars in investment. However, lost in the last-minute congressional maneuvering was an industry proposal to extend the wind PTC over four years with a gradually shrinking benefit before phasing out in 2018.

Four other PTC provisions in the bill are aimed at biofuels, including a $1.01-per-gallon tax credit for the production of cellulosic biofuels production tax credit on fuel produced before the end of 2013. A bonus depreciation under which cellulosic facilities can expense 50 percent of their eligible capital costs in the first year was extended through 2013. And the bill also expands the definition of qualified cellulosic biofuel production to include algae-based fuel.

The $1-per-gallon tax credit for biodiesel that expired at the end of 2011, the small agri-biodiesel producer credit of 10 cents per gallon, and the $1.00 per gallon tax credit for diesel fuel created from biomass, have been reinstated retroactively and extended through 2013. The industry says the lack of the biodiesel PTC in 2012 cost the sector some 300 million gallons in production and more than 19,000 jobs.

A tax credit for energy research and experimentation expenses that expired at the end of 2011 was also revived and extended through 2013.

The “fiscal cliff” bill did provide an extension through September 2013 of the 2008 Farm Bill and the programs included in the bill’s Energy Title. Unfortunately, this week’s legislation provided no mandatory funding for those programs.

Overall, the week’s developments can be seen as encouraging. But the recurring theme throughout all of them is that they are short term, offering benefits only through 2013. The 11th-hour approval this week of critical legislation now sets the stage for another possible showdown in Congress later this year over renewable energy tax benefits and the instability of clean energy markets that on again-off again congressional support produces.

The new, 113th Congress, which goes into session this week, must do a better job than the 112th did over the past two years and give a comprehensive and serious look at energy policy, and adopt a plan that offers the renewable energy sector long-term market stability.

For that to happen, stakeholders must do a better job of clearly demonstrating the benefits of renewable energy, including a boost to the economy through new job creation, enhancing our national energy security by reducing our reliance on foreign oil, and improving our environment by offering energy alternatives with limited or no emissions. The new Congress is a new opportunity for advocates to make clear to policy makers the obvious advantages of home-grown sources of power and fuels, not the least of which is increased energy independence.

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

Leave a Reply