Tax credit extensions could spur up to 53 GW in new renewable power

The Department of Energy (DOE)’s National Renewable Energy Laboratory (NREL) concludes that the recent extension of renewable energy tax incentives can stimulate an additional 53 GW of renewable power and cut power sector carbon dioxide (CO2) emissions significantly by 2030.

The new 42-page report details the use of modern scenario modeling to see how renewable deployment in the contiguous United States is influenced by recent federal tax credit extensions, as well as how emissions would be reduced.

In December 2015, renewable tax credits — including the wind power production tax credit and solar investment tax credits — were extended as part of the Consolidated Appropriations Act of 2016. The act extended the solar and wind tax credit deadlines by five years from their prior scheduled expiration dates, but included ramp downs in tax credit value during the latter years of the five-year period.

The report examines the impacts of the tax credit extensions under two distinct natural gas price futures, as the price of natural gas has been a key factor influencing the economic competitiveness of new renewable energy development.

The analysis finds that, in both natural gas price cases, tax credit extensions can spur renewable capacity investments at least through the early 2020s, and can help lower CO2 emissions from the U.S. electricity system. 

The tax credit extensions are estimated to drive a net peak increase of 48-53 GW in installed renewable generation capacity in the early 2020s.

Longer-term impacts are less certain and can depend on natural gas prices. After the tax credits ramp down, greater renewable energy capacity is driven by a combination of assumed cost reductions in renewable generation, assumed rising fossil fuel prices, and existing clean energy policies.

The tax credit extension-driven acceleration in renewable energy capacity development can reduce fossil fuel-based generation and lower electric sector CO2 emissions. Cumulative emissions reductions over a 15-year period (spanning 2016-2030) as a result of the tax credit extensions are estimated to range from 540 to 1,400 million metric tons CO2.

The report was written by Trieu Mai, Wesley Cole, Eric Lantz, Cara Marcy, and Benjamin Sigrin of NREL.

The study acknowledges there are significant uncertainties with respect to future policies, as highlighted by the recent U.S. Supreme Court stay on the Environmental Protection Agency Clean Power Plan (CPP).

Recent growth in installed renewable capacity has been, in part, driven and supported by federal tax credits, state policies, consumer demand, renewable technology advancements, and global market conditions, according to NREL.

“Over the five-year period through 2014, this growth has accelerated; new [renewable] capacity installations grew at an average rate of 10,600 MW per year between 2010 and 2014, compared with about 4,100 MW per year between 2001 and 2009.”

Total renewable growth equaled 12,800 MW in 2014 while record-level annual renewable installations of 17,600 MW occurred in 2012. Most of these additions are composed of new wind and solar, which have therefore captured more federal tax incentives than other renewable technologies, according to the report.

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