Sunday, December 27, 2015

Surprise! Congress extends renewable energy tax credit


The U.S. solar and wind power industries will mark the holidays with heightened spirits after receiving multi-year extensions of their coveted renewable energy tax credits from a divided Congress, Daniel Cusick reports for ClimateWire.
On Friday, the House and Senate agreed by significant margins to grant extensions to the 30 percent investment tax credit (ITC) for solar energy and the 2.3-cent-per-kilowatt-hour production tax credit (PTC) for wind power. 

Other technologies—including geothermal, marine energy and small hydropower—received one-year extensions to their 30 percent ITC under the joint spending and tax measures passed Friday and expected to be signed by President Obama this week.

[Editor's Note: President Obama signed the bill on Dec. 18]

The largest beneficiaries of Congress' year-end gifting were the solar and wind sectors, both of which will see their tax credits extended to at least the end of the decade.

"This is one of the most significant stimulus policies for the renewable sector I've seen in the past 10 years," said Alex Klein, senior director of renewable power research at the consulting firm IHS Inc. 

The PTC for wind energy will remain at full strength through 2016, followed by incremental reductions in value for 2017, 2018 and 2019 before expiring in January 2020. The ITC for solar will continue at 30 percent levels for both commercial and residential systems through 2018, then taper off in yearly increments to settle at 10 percent in 2022. 

"With predictable policies now in place, we will continue advancing wind turbine technology, driving down our costs and passing the savings on to American families and businesses in all corners of the country," Tom Kiernan, CEO of the American Wind Energy Association, said in a statement.

On a Friday morning conference call with reporters before the Senate vote on the tax extenders package, Rhone Resch, president and CEO of the Solar Energy Industries Association, said the industry group was "pretty excited about what's happening here, but we're not across the finish line yet."

The finish line came just a few hours later, as the Senate voted 65-33 in favor of a $1.15 trillion omnibus spending bill and companion $629 billion tax bill that should keep the government running through September (Greenwire, Dec. 18).

The House of Representatives agreed to the package in an earlier vote of 316-113.

Building a bridge for the Clean Power Plan
In addition to the spending and tax provisions, Congress also formally lifted a ban on U.S. crude oil exports, something Republicans and oil-state Democrats had sought.

Experts said the renewable energy provisions will result in billions of additional dollars in tax breaks for wind and solar power developers, something many Republicans were remiss to hand out. At the same time, the extenders should stimulate hundreds of billions of dollars in new renewable energy investment and help drive the nation's transition away from traditional fossil fuels in favor of cleaner forms of energy, observers said.

Malcolm Woolf, senior vice president for policy and government affairs at Advanced Energy Economy, a national business group, said, "Investors and project developers now have the market signal they need for investment, business growth and jobs in the coming years."

Several experts noted that one of the benefits of the ITC and PTC extenders is that they provide a bridge for renewable energy expansion between now and the first set of state compliance deadlines for U.S. EPA's Clean Power Plan in 2022. The CPP will require a 32 percent cut in utility-sector carbon emissions from 2005 levels by 2030, with some states seeing reduction requirements as high as 45 to 47 percent.

While states will be able to use a variety of approaches to reduce carbon emissions, experts predict that utilities not already investing in wind and solar power will begin shifting significant amounts of capital to the technologies, especially as installation costs continue to fall and issues around intermittency and grid interconnections are resolved.

"There will be a lot of build in markets where there's a need for CPP compliance," Klein said. "We expect a lot of incremental wind build in Texas and a lot of growth in solar in the Southeast and the Midwest."

SEIA's Resch said, "A big part of what we need to do going forward is help states understand ... the value proposition behind solar energy."

Julia Hamm, president and CEO of the Solar Electric Power Association, said in a statement that the five-year ITC extension "will allow for broader participation and deployment of solar applications across the country, especially in regions where local markets are less mature."

Praise for a 'level of predictability'
Market projections from SEIA and partner GTM Research indicate the U.S. solar market will add roughly 72 gigawatts of new capacity between 2016 and 2020, pushing the country's net solar capacity to more than 100 GW, or roughly 3.5 percent of all electricity produced in the United States.

Solar sector investment is expected to rise by $40 billion between 2016 and 2020, according to SEIA, and after 2020 should draw an average of $30 billion a year. Solar employment is also poised to nearly double over the same period, to roughly 420,000 jobs.

Wind industry officials did offer specific numbers on the PTC extension but made clear the multi-year deal provides companies "with a level of predictability needed to keep U.S. factories open while adding new wind projects to the pipeline."

Mike Garland, AWEA's board chairman and CEO of Pattern Energy Group Inc., one of the nation's major wind energy developers, said the five-year PTC extension "will allow us to make more supply commitments and build more projects, creating more jobs."

AWEA credits the PTC for spurring a more than 300 percent increase in U.S. wind power since 2008—from 16.7 GW to 69.5 GW by the third quarter of 2015.

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