Two important pieces of legislation have been introduced in the House and Senate that would provide long-term certainty to the clean energy industry by extending tax credits for wind, geothermal, hydro and biomass facilities.
Yesterday in the House, Washington Republican Dave Reichert and Oregon Democrat Earl Blumenauer introduced a piece of legislation that would extend the production tax credit (PTC) for a suite of renewable energy technologies through 2016. The PTC provides a credit of 2.2 cents for every kilowatt-hour of electricity generated by a qualifying facility. The PTC for wind is set to expire at the end of 2012, and the PTC for geothermal, hydro and bioenergy would expire the following year.
Because projects take years to plan and develop, the prospect of an expiration frequently causes a “boom-bust” cycle. In the lead-up to the expiration date, there’s a frenzy of activity to take advantage of the credit. Then project levels fall drastically the following year. This is happening today in the wind industry as companies anticipate the end of the Treasury Grant Program this year, and the potential lapsing of the PTC next year.
In a statement after the bill was introduced, Karl Gawell, executive director of the Geothermal Energy Association, explained that companies in the geothermal sector are seeing a similar problem.
“Extending federal tax incentives through 2016 is vital for the future of the US geothermal industry. We are already seeing a slow-down in projects unable or unlikely to meet the current deadline. This legislation would stem this downturn and sustain growth in the US geothermal industry.”
The PTC primarily benefits large-scale facilities. A bill introduced in the Senate would also extend incentives to community-scale wind facilities, potentially spreading the financial benefit of project development to a broader range of people.
Minnesota Democratic Senator Al Franken and Montana Democratic Senator Jon Tester introduced the Community Wind Act, which would expand a small wind Investment Tax Credit to projects up to 20 MW. Currently, that that tax credit is only available for facilities up to 100 kW. The ITC offers investors a 30% credit based upon capital costs.
Because of the complexities of the PTC, it can be difficult for smaller community projects to arrange project financing. This piece of legislation is designed to make financing models simpler and bring in more capital to the sector.
These are two promising developments. If Congress is serious about creating conditions for businesses in the U.S. to grow, these simple pieces of support would help leverage thousands of new clean energy projects and billions in private financing.
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