Photo by Flickr User Fort PhotoA thriving renewable energy industry is a critical solution to problems such as high energy prices and climate change. But unless Congress extends the renewable tax credits soon, the industry’s steady growth could stall.
For the past year, lawmakers have vigorously debated three inter-connected issues: energy costs, the economy, and climate change.
Green power is part of the solution for all three. First, a sustained clean energy boom will make our economy less dependent on fossil fuels such as natural gas that are subject to significant price volatility. Second, better policy support for green power will allow U.S. companies to lead in a fast growing market, and create the jobs and technologies that will supply the world with the next generation of energy. Finally, the displacement of fossil fuels in favor of renewable energy will decrease greenhouse gas emissions and help tackle the climate change threat.
Renewable energy tax credits—the Production Tax Credit (PTC) and the Investment Tax Credit (ITC)—have been a key driver of in the development of green power in the United States. These credits improve the cost-competitiveness of low-carbon technologies for energy production.
The incentives have wide, bipartisan support, but a Congressional fight over how to pay for them has left the future of these tax incentives in limbo. (Read more here.) In late July, the Senate again failed to extend them. They are set to expire on December 31st. With the political world focused squarely on the November election, lawmakers have little time to pass tax credit extensions before Congress adjourns at the end of the year.
The tax savings companies receive from the credits can make the difference between a profitable renewable energy project and a failed one. The PTC and the ITC also increase R&D funding to these industries and speed the rate at which these technologies are adopted in the market. (Learn more about renewable tax credits from WRI’s Bottom Line publication.)
Year-to-year extensions do not provide the certainty companies need to make large, long-term capital investments that are necessary to complete renewable power projects.
As the chart below illustrates, the wind industry is especially dependent on the Production Tax Credit (PTC). Congress failed to renew the PTC in 1999, 2001, and 2003. Consequently, wind project development stalled. Congress passed a three-year extension in 2004, and the certainty provided to the industry has led to sizable growth. In 2007, the U.S. wind power industry grew by 45 percent, and AWEA predicts the U.S. will become the world’s top wind power producer by year’s end. (Chart courtesty of AWEA.)
AWEA executive director Randall Swisher recently told ClimateWire, “Over the next month, if Congress doesn’t act, [the companies] may have to abandon projects for 2009.” “We’re talking about them walking away,” Swisher added. “It’s a disastrous scenario that’s just unbelievable in light of all the progress the industry has made.”
A recent Navigant Consulting report predicted that without the tax credits, the wind and solar PV industries would mean a loss of over $19 billion in investment and 116,000 jobs. The solar industry has benefited from the ITC especially. The Solar Energy Industry Association (SEIA) said failure to extend the tax credits would be a “severe blow,” warning that “‘tens of thousands of jobs and billions of dollars will be lost in new solar investment.”
Other green power sectors have seen expansive growth the last few years, in no small part due to the tax credits. Allowing the tax credits to sunset will significantly reduce that growth, which no matter where you stand in the energy debate, is a bad idea. The following chart shows how many emerging types of renewable power—including geothermal and biomass—benefit from the credits:
The Green Power Market Development Group (GPMDG), a 15-member consortium of companies organized by WRI, has called for both the House and Senate to pass renewable tax credit extensions, calling them “vital for supporting near-term development and utilization of cost competitive renewable energy.” GPMDG is made up of a diverse set of fortune 100 companies, including Dupont, Google, and Starbucks.
The experience of WRI’s Green Power Market Development Group in pursuing a range of renewable energy projects has shown that in order to be most effective, Congress should:
- Extend renewable energy tax credits for 5-10 Years. The potential expiration of renewable energy tax credits casts uncertainty on the value of renewable energy investments currently in the pipeline. Just as problematic, past extensions have just been for 1 or 2 years, and advocates have had to fight hard to get even those.
- Cover all renewables equally. The 1.9 cent/kWh production tax credit applies only to wind, geothermal, solar, and closed-loop biomass projects. Less-known types like Open-loop biomass landfill gas, anaerobic digestion, and certain hydro projects, which also have potential, receive only 0.9 cents/kWh. The 1.9 cent level should apply to all renewable resources.
- Make renewable energy tax credits transferable. Some green power facilities–for instance, those owned by public utilities–don’t qualify for the tax credits, The simple fix is to allow these credits to be transferred to a third party that can sufficiently use them.
Learn more at the Green Power Market Development Group’s website.
Payson Schwin, Online Communications OfficerPayson Schwin is the Online Communications Officer at the World Resources Institute, where he helps to develop and execute WRI’s online communications strategy.
8 Comments
In 1997, the Kyoto Protocol,
In 1997, the Kyoto Protocol, an international greenhouse gas treaty, was ratified by over 175 countries, committing the industrialised countries to reduce the six greenhouse gases by 5.2 percent from 1990 levels in the period 2008-2012. In Bali last December, governments agreed that emission reductions of 25-40 percent will be necessary by 2020.
But, i never read that the USA ratified this?
I think, there´s no
I think, there´s no alternative for green power. Renewable energy will change any part of industry. Maybe in 10 or 20 years, many people will drive by electric car. In fact, the future is coming soon.
"The nation needs an
"The nation needs an ambitious plan to promote the deployment of wind and other renewable energy technologies -- and the urgent first step it must take is to rapidly extend the expiring renewable energy credits, which are the primary incentive that the nation provides for these technologies today."
-- Randall Swisher, Executive Director, AWEA
It's not about climate change, it's about tax sheltering. If it was about climate change, our generous public subsidies would be tied by index to reduction in harmful emissions by wind energy. But, such index would demonstrate that wind energy only serves the primary incentive of WindCats as provided by Mr. Swisher.
On wind energy: The
On wind energy: The extension of the PTC will help clean, renewable sources of energy (not only wind, but also emerging industries like geothermal) to become cost-competitive with high-carbon energy sources. Here’s what our energy team says about wind:
“Wind is an abundant source of energy in the U.S. and can contribute to energy security by providing a low-cost, renewable supply. Good wind resources exist in almost every state and are theoretically capable of providing more than the total current electricity consumption of the U.S. Wind is the least expensive renewable energy source today and future technology developments are expected to lower costs further. […]
“The main benefit of wind power is that it does not produce nitrogen and sulfur oxides, particulates, and mercury—the pollutants responsible for acid rain and smog, amongst other environmental harms. It is also a carbon free energy source and therefore can help users meet carbon mitigation goals. Wind power also offers a boost to rural economies, where most wind resources are located. Finally, wind power has predictable fuel costs (zero) over the life of the project, something that many gas-fired combined-cycle operators wish for.”
You can read more about different U.S. energy options here.
Wind energy is the
Wind energy is the antithesis of a solution as it's land and sea guzzling; and neither affordable nor reliable. Windcats and PetroCats are one in the same seeking to shift our wealth their way.
Thomas G. Donlon May 16, 2005, issue of Barrons: "It is shameful that GE, a highly profitable company, has decided to take advantage of faulty federal and state wind energy policies by producing turbines for "wind farms". In addition to environmental damage..., wind power has an economic flaw that any GE engineer ought to be able to imagine: Since no human power can turn the wind on and off when it's wanted for electricity, every bit of wind power capacity must be backed up by another generating source...Immelt, an engineer, understands this but he provided the executive's counter argument": "The customers want it, so it's GE's job to produce it."
“Immelt, an engineer.” Jeffrey Immelt, the engineer, is also the CEO and Chairman of the Board of GE, operating in more than 100 countries, employing over 300,000 people, with revenues of over $131 billion in 2002.
What Does Wind Cost?
"The Energy Information Administration assumes the total overnight capital cost of an onshore wind turbine to be $1,497 per kilowatt (in 2008 dollars) and that of an offshore wind unit to be $2,998 per kilowatt.[18] These costs are below the estimated cost made by the National Association of Manufacturers (NAM) and the American Council for Capital Formation (ACCF) of $2000 per kilowatt for onshore units and $3800 per kilowatt for offshore units (also in 2008 dollars).[19]. "
http://www.instituteforenergyresearch.org/facts-on-energy-wi...
'Vestas calls for greater focus on onshore wind'
30 May 2008
“As new report warns that the cost of offshore wind farms will soar, leading turbine manufacturer urges politicians and media to turn attention to onshore wind”
“Vestas, the world's largest manufacturer of wind turbines, has today urged political leaders to focus more on increasing capacity from onshore wind farms, amid warnings that the cost of installing offshore wind turbines will continue to rise.”
http://www.businessgreen.com/business-green/news/
2217931/vestas-calls-greater-focus
Cambridge Energy Research Associates CERA:
'Offshore Wind Power Capital Costs Will Continue To Rise, Creating New Challenges for European Renewable Energy Targets'
http://www.cera.com/aspx/cda/public1/news/pressReleases/
pressReleaseDetails.aspx?CID=9512
How is the cradle of wind turbines, Denmark, doing with the reduction of harmful emissions? http://ipsnews.net/news.asp?idnews=43999
The true cradle of wind energy is Enron.
UPDATE: The House approved,
UPDATE: The House approved, and President Bush signed into law, legislation to extend the PTC for wind energy for one year and the ITC for solar for eight years. Read more here.
Renew tax credits
Renew tax credits
Thanks for highlighting an important but poorly-appreciated issue in the renewable energy/energy independence/climate change debate. Let's hope somebody on Capitol Hill reads this and whispers in the right ear. Losing Amerian jobs and billions in investment is certainly not a step in the right direction with the economy in such troubled times right now - especially if it jeapordizes one of the few fast-growing industries as the economy slows down. If funding is the issue, they could start by repealing some of the billions in subsidies and tax breaks that are given to the oil&gas industry. Anybody read about the oil ethics scandal that broke today???
I also think, that renewable
I also think, that renewable energy ist one of the biggest challenges for our modern society. Economy ist growing and oil consuption is rising enormously. There ist no other way.