Archive for ITC

Congress Passes Tax Credits for Solar and Wind: ‘Sausage-Making at Its Most Intense’

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The biggest federal policy development of the year for renewables plays out on Congress’ last day of work in 2015.

By Stephen Lacey
December 18, 2015

Lawmakers in the House and Senate passed a spending package today that includes multi-year extensions of solar and wind tax credits, plus one-year extensions for a range of other renewable energy technologies.

The pair of bills, which included tax extenders and $1.1 trillion in funding to keep the government running for the next year, passed hours before lawmakers adjourned for the holidays.

“May the force be with you,” said Senator Dianne Feinstein, urging her fellow Senators to vote in favor of the package shortly after the House approved the bills.

The force was certainly with renewables.

Under the legislation, the 30 percent Investment Tax Credit (ITC) for solar will be extended for another three years. It will then ramp down incrementally through 2021, and remain at 10 percent permanently beginning in 2022.

The 2.3-cent Production Tax Credit (PTC) for wind will also be extended through next year. Projects that begin construction in 2017 will see a 20 percent reduction in the incentive. The PTC will then drop 20 percent each year through 2020.

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Also included were geothermal, landfill gas, marine energy and incremental hydro, which will each get a one-year PTC extension. Those technologies will also qualify for a 30 percent ITC, if developers choose. In addition, the bill expanded grants for energy and water efficiency.

Business groups and analysts say the extensions will support tens of billions of dollars in new investment and hundreds of thousands of new jobs throughout the U.S.

“There’s no way to overstate this — the extension of the solar ITC is the most important policy development for U.S. solar in almost a decade,” said MJ Shiao, GTM’s director of solar research.

According to GTM Research, the ITC extension will help spur nearly 100 cumulative gigawatts of solar installations by 2020, resulting in $130 billion in total investment. More than $40 billion of investment will be “directly attributable to the passage of the extension,” said Shiao.

The American Wind Energy Association expects similar growth. The group did not issue precise figures, but said the PTC extension would support tens of gigawatts of new wind projects through 2020.

The legislation also lifts a 40-year ban on exports of crude oil produced in the U.S. In exchange for lifting the ban, Democrats pushed for multi-year extensions of renewable energy tax credits and demanded that Republicans strip out any riders that would weaken environmental laws.

Both sides got what they wanted.

However, Pelosi publicly worried yesterday that she didn’t have enough votes to support the bill. Many Democrats expressed concern about the oil export ban tradeoff, saying it would increase subsidies to fossil fuels and boost carbon emissions.

Congressional leaders and the White House lobbied hard to convince the Democratic base that the bill would be a win for the environment.

“While lifting the oil ex­port ban re­mains atrocious policy, the wind and solar tax credits in the Om­ni­bus will eliminate around 10 times more car­bon pollution than the ex­ports of oil will add,” wrote Pelosi in a letter to lawmakers.

Katherine Hamilton, a partner with 38 North Solutions, called the bill “sausage-making at its most intense.”

“The product should be palatable for most parties in clean energy. Extensions for renewables and efficiency tax credits were key sweeteners. In addition, clean energy R&D funding, land and water conservation funds, and clean energy funds were included in the deal,” she said.

Other independent analysts found that the deal would be a net positive for the climate. Although emissions would increase slightly because of increased drilling activity, they would be easily offset by increasing renewable energy development and decreased coal consumption.

“Our bottom line: Extension of the tax credits will do far more to reduce carbon dioxide emissions over the next five years than lifting the export ban will do to increase them. While this post offers no judgment of the budget deal as a whole, the deal, if passed, looks like a win for climate,” wrote Council on Foreign Relations fellows Michael Levi and Varun Sivaram.

The tax credit extensions cap a big month for renewable energy policy.

In early December, world leaders agreed to a framework for lowering global greenhouse gas emissions — a deal that will leverage hundreds of billions of dollars in private investment for clean technologies.

And earlier this week, California regulators issued a new proposal on net metering that would preserve the retail rate paid to rooftop solar systems. The new rules — combined with the continued federal tax credit — will ensure strong activity in the top solar state.

National groups will now likely reset their sights on local battles around the U.S., said Hamilton.

“The renewable energy industries can turn their focus to state and local policies, siting and permitting issues, and compliance strategies for the Clean Power Plan,” she said.

President Obama is expected to sign the bill into law today.

Congress Is on the Verge of Passing Multi-Year Extensions for Solar and Wind Tax Credits

Lawmakers reached a compromise as part of a spending package. Will there be enough votes to pass it this week?

by Stephen Lacey
December 16, 2015
28

House Republicans unveiled legislation late Tuesday night that included multi-year extensions of tax credits for solar and wind.

The credit extensions were attached to a broad set of spending measures as part of a negotiation with Democrats over lifting the ban on exports of U.S. crude oil.

Rhone Resch, president of the Solar Energy Industries Association, predicted in November that solar tax credits would likely be added to any deal around lifting the oil export ban. He called it “our best opportunity.”

“Democrats are saying, ‘We need to get something for it,’ and the White House is chiming in too,” said Resch.

This month, Republicans demanded an end to the 40-year-old ban as part of a legislative tax and spending package that would fund the government through next fall.

Although many Democrats oppose ending the ban, they saw it as an opportunity to demand extensions of the Investment Tax Credit (ITC) for solar and the Production Tax Credit (PTC) for wind.

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Yesterday afternoon, Democratic leaders said they would only support the Republican proposal if renewable energy credits were added to a tax or spending bill.

“We have 2 paths: 1. Pair oil export ban with policies to reduce carbon emissions; 2. Pass gov’t funding without oil/renewables,” tweeted Senator Harry Reid yesterday afternoon.

In 1975, Congress made it illegal for domestic drillers to ship crude out of the country. The export ban was designed to protect America from volatile oil prices in the wake of the Arab Oil Embargo. As U.S. production dwindled over the proceeding years, the policy was not contested.

Today, America is a leading producer of crude — and drillers argue they should be able to export oil as an incentive to expand production.

Some see the tradeoff as a good deal.

“An oil-exports-for-renewables-tax-credits deal looks likely to be a win-win. Removing the oil export ban is good policy. Supporting zero-carbon energy innovation, including through appropriate deployment subsidies, is good policy,” wrote Michael Levi, a senior fellow at the Council on Foreign Relations, in a recent analysis of the deal.

Last night, House Speaker Paul Ryan unveiled an omnibus spending bill that would lift the ban, while also extending solar and wind tax credits for two years.

The PTC — a 10-year, 2.3-cent per kilowatt-hour credit — would be extended through 2020. After December of 2016, the credit would be cut each year until it fully expired in 2020.

The ITC — a 30 percent credit for utility, commercial and rooftop solar installations — would get phased down through 2022. The credit would stay at 30 percent through 2019, and then fall to 26 percent in 2020. It would drop to 22 percent in 2021 and 10 percent in 2022. The bill also offers a commence-construction clause that would extend the credit to any project in development before 2024.

“The extension to the federal ITC is without question a game-changer for U.S. solar’s growth trajectory. Between now and 2020, the U.S. solar market is poised to see a number of new geographies open up with a 30% ITC, within both distributed and utility-scale solar,” said Cory Honeyman, a senior solar analyst at GTM Research.

The House and Senate will likely vote on the package Thursday night or Friday morning.

Although Democrats have signaled their willingness to support the deal, House Speaker Nancy Pelosi told Bloomberg that broad agreement wasn’t guaranteed — even with strong extensions of renewable energy credits.

Opponents see lifting the ban as a massive subsidy to oil producers and an environmental risk. In an op-ed this week, climate activist Bill McKibben explained why so many progressive environmentalists opposed a change to the law.

“What makes the plan to lift the ban especially galling is that the administration and congressional Democrats insist they’re getting a reasonable deal because the Republicans will concede tax breaks for solar and wind producers in return. But the logic of the Paris accords — with their theoretical commitment to a world that will warm just 1.5 or 2 degrees — means that we don’t get to keep making this kind of tradeoff,” wrote McKibben.

Speaker Ryan assured reporters that he would get the votes to pass the package.

“I am not going to predict how the vote count will go down,” Ryan said this morning during a press event. “Look, in negotiations like this, you win some, you lose some. Democrats won some, they lost some, we won some, we lost some. At the end of the day, we are going to get this done.”