Solar, wind tax credits included in key congressional spending plan

The U.S. Congress appears poised to pass a major spending plan that includes a “tax extenders” provision for key tax credits that benefit solar and wind power, officials said Dec. 16.

It was widely reported that members of the House of Representatives were lining up behind a $1.1 trillion omnibus spending plan that includes numerous energy-related provisions – including extension of tax credits for renewable power.

While some members disliked individual aspects of the package, most national media reports suggested a majority of lawmakers were expected to back the omnibus proposal.

“Just last night, congressional leaders filed an omnibus appropriations bill that provides a long-term extension of the Solar Investment Tax Credit (ITC),” said Solar Energy Industries Association (SEIA) President and CEO Rhone Resch in a Dec. 16 email to his members.

“This bipartisan agreement represents an enormous victory for solar energy in the United States and will provide a stable investment environment for the next eight years,” Resch said. “While the prospects are very good, it is not a done deal,” the solar official added. “The House will vote on the bill as soon as Thursday and the Senate shortly thereafter.”

“This gives the wind and wind and solar industries the policy certainty they need to plan future investments, create good jobs and keep making progress on climate change,” said Environmental Entrepreneurs (E2) Bob Keefe.

“This agreement will enable wind energy to create more affordable, reliable and clean energy for America by providing multi-year predictability as we have called for,” said American Wind Energy Association (AWEA) CEO Tom Kiernan. “The later years of this agreement will provide some challenges that the wind industry will work to overcome with our employees, partners and champions,” Kiernan said.

According to the agreement, the Production Tax Credit and alternate Investment Tax Credit would be extended for 2015 and 2016, and continue at 80% of present value in 2017, 60% in 2018, and 40% in 2019. As before, the rules will allow wind projects to qualify as long as they start construction before the end of the period, AWEA said.

The credit is currently worth 2.3 cents a kilowatt-hour of electricity generated for the power grid. Combined with continued growth in demand for low-carbon fuel sources, that is intended to keep wind energy attractive for the investors who finance new wind farms, AWEA said.

Number of items tucked into spending plan

The conservative Americans for Prosperity said it had a “mixed reaction” to the proposal. The plan “would lift the outdated crude oil export ban and also extend corporate welfare for alternative energy producers.”

The measure includes extension for everything from tax credits for plug-in electric motorcycles to a $2/ton tax credit for coal produced on land owned by Indian tribes.

IHS Research said key points for solar power are:

•The ITC will be extended from Dec 31, 2016 and instead stepped down from 30% to 10% until 2024. Projects that start construction by 2019 will receive the current 30% ITC, while projects that begin construction in 2020 and 2021 will receive 26% and 22%, respectively. All projects must be completed by 2024 to obtain these elevated ITC rates.

•For residential photovoltaic (PV) systems, a similar tax credit phase-out applies until Dec. 31, 2021, after which the tax credit scheme ends. 

In addition to an extension of the solar ITC, production tax credits for wind installations will also be introduced, in return for a removal of a 40-year long ban on oil exports from the United States.

The ITC extension comes on top of the proposed decision announced yesterday by the California Public Utilities Commission (CPUC) to keep California’s current net energy metering (NEM) policy in place after its current expiration in 2017 with only minor modifications, said Bernstein Research.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.