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Will Congress Cut Off Key Clean Energy Incentives?

By Stephen Lacey on November 3, 2011 at 10:30 am

"Will Congress Cut Off Key Clean Energy Incentives?"

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Two important pieces of legislation have been introduced in the House and Senate that would provide long-term certainty to the clean energy industry by extending tax credits for wind, geothermal, hydro and biomass facilities.

Yesterday in the House, Washington Republican Dave Reichert and Oregon Democrat Earl Blumenauer introduced a piece of legislation that would extend the production tax credit (PTC) for a suite of renewable energy technologies through 2016. The PTC provides a credit of 2.2 cents for every kilowatt-hour of electricity generated by a qualifying facility. The PTC for wind is set to expire at the end of 2012, and the PTC for geothermal, hydro and bioenergy would expire the following year.

Because projects take years to plan and develop, the prospect of an expiration frequently causes a “boom-bust” cycle. In the lead-up to the expiration date, there’s a frenzy of activity to take advantage of the credit. Then project levels fall drastically the following year. This is happening today in the wind industry as companies anticipate the end of the Treasury Grant Program this year, and the potential lapsing of the PTC next year.

In a statement after the bill was introduced, Karl Gawell, executive director of the Geothermal Energy Association, explained that companies in the geothermal sector are seeing a similar problem.

“Extending federal tax incentives through 2016 is vital for the future of the US geothermal industry. We are already seeing a slow-down in projects unable or unlikely to meet the current deadline.  This legislation would stem this downturn and sustain growth in the US geothermal industry.”

The PTC primarily benefits large-scale facilities. A bill introduced in the Senate would also extend incentives to community-scale wind facilities, potentially spreading the financial benefit of project development to a broader range of people.

Minnesota Democratic Senator Al Franken and Montana Democratic Senator Jon Tester introduced the Community Wind Act, which would expand a small wind Investment Tax Credit to projects up to 20 MW. Currently, that that tax credit is only available for facilities up to 100 kW. The ITC offers investors a 30% credit based upon capital costs.

Because of the complexities of the PTC, it can be difficult for smaller community projects to arrange project financing. This piece of legislation is designed to make financing models simpler and bring in more capital to the sector.

These are two promising developments. If Congress is serious about creating conditions for businesses in the U.S. to grow, these simple pieces of support would help leverage thousands of new clean energy projects and billions in private financing.

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2 Responses to Will Congress Cut Off Key Clean Energy Incentives?

  1. Sasparilla says:

    It would be great if such a bill could move forward in the GOP controlled House, but it would seem beyond a long shot for this to pass the House.

    I’d love to be proven wrong on this, but Republican leadership have shown themselves to be at nothing less than war with green technologies (this year in particular).

  2. dick smith says:

    On a related note. Legislation has also been introduced this week to enact a fee-and-dividend bill as recommended by NASA’s James Hansen. While the real push will occur next session, below are a few paragraphs from the press release. It would be great to see some more in-depth analysis of Stark’s proposal.

    “As the need to reduce greenhouse gas emissions grows more evident each week, Citizens Climate Lobby welcomed the introduction of Rep. Pete Stark’s (D-CA) Save Our Climate Act as a critical step in efforts to stop the worst effects of climate change.

    “We’re running out of time to wean our nation off the fossil fuels that are heating up the planet,” said CCL’s Executive Director Mark Reynolds. “We need to put a price on carbon that shifts energy usage to clean sources, and that’s what Congressman Stark’s bill does.”

    The Save Our Climate Act, H.R. 3242, would tax coal, oil and gas based on the amount of carbon dioxide these fuels would emit when burned. Starting at $10 per ton of CO2, the tax would increase by $10 each year until CO2 emissions fall to 20 percent of 1990 levels. Most of the revenue from the Save Our Climate Act – an estimated $2.6 trillion in the first 10 years – would be returned to consumers as an annual rebate to offset higher energy costs. A portion of that revenue — $490 billion – would go toward deficit reduction.