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What to Expect When You’re Expecting Clean Energy

What to Expect When You’re Expecting Clean Energy

NOTE: This is a guest post from Erica Etelson, a blogger for Mosaic, an online marketplace for investing in solar. Follow Erica at @iluvsolar.

With the election finally behind us, Americans are quickly returning to the work at hand — comedians are developing original material in the absence of the daily dish of gaffes, President Obama is negotiating with Congress to steer us away from the looming fiscal cliff, and renewable energy lobbyists are gearing up to keep incentives for renewables off the chopping block when Congress starts making the deep spending cuts we know are coming.

There are a handful of important opportunities and pitfalls facing the renewables industry in the months and years ahead, the most pressing of which is the extension of the Production Tax Credit (PTC) for wind power producers set to expire this year. The PTC gives tax breaks to owners of renewable energy projects based on how much power they produce and sell. It’s critical for the relatively young wind industry, because it helps them secure financing and sign purchase agreements with utilities. (Solar developers don’t benefit from the PTC because, until recently, they haven’t resold the electricity they generate.)

If Congress does not renew the PTC, investment in wind power could drop from $15.6 billion in 2012 to $5.5 billion next year, meaning the loss of 37,000 jobs, according to the Union for Concerned Scientists.  Uncertainty about the PTC’s future has already resulted in hundreds of layoffs. With Obama’s support, wind industry observers believe the PTC is likely to be extended.

For solar developers, it’s all about the Investment Tax Credit (ITC) which is set to sunset in 2016. The ITC reduces taxes for owners of clean energy projects at the time the project starts generating electricity. For homeowners and businesses, this has meant a 30 percent tax credit during the tax year when they installed solar PV, solar water heaters, wind turbines or geothermal pumps. These credits have been around since 2005 but, in a post-Solyndra, post-fiscal cliff world, it’s likely they will be phased out. For more on the timeline for subsidies, there’s a good article in the Wall St. Journal that runs down the whole list and doesn’t even make any snide remarks about renewables.

If renewable energy tax credits are phased out too quickly, the renewables sector will shed thousands of jobs, and costs for renewable power will increase. Though with PV prices still coming down fast, the solar industry is likely to be cost-competitive even without the tax credit by 2016. Another threat to renewable’s ability to achieve grid parity is natural gas — depending on the outcome of efforts to regulate or ban fracking at the national and state levels, the price of natural gas relative to wind and solar will have a big impact on the growth of renewables.

Two more items high on the renewable industry wish list are a National Clean Energy Standard and Clean Energy Victory Bonds. Obama proposed a National Clean Energy Standard (basically a federal standardizing of state renewable portfolio standards) during his State of the Union address this year as an alternative to the failed cap and trade legislation. The concept has strong support in the Senate and on the part of voters who are, on average, willing to pay $162 higher electricity bills per year to support a national 80 percent clean energy standard. Does House Speaker Boehner’s conciliatory tone and purple tie mean he’ll instruct House Republicans not to block a clean energy standard? Stay tuned.

As for Clean Energy Victory Bonds, Treasury bonds that would raise $50 billion for clean energy projects, legislation was proposed this year and will certainly not pass through this Congress. It will likely be brought forward again next year.

And now for the sleeper… a carbon tax? Really? Here’s why it’s possible: Congress will be addressing the long term fiscal and debt conundrum, the end result of which will be a long list of spending cuts and a short list of tax increases, which may include corporate tax reform. Large, powerful corporations (other than fossil fuel companies) could conceivably throw their weight behind a tax on big polluters instead of an increase of their own corporate tax rate or the closing of beloved corporate tax loopholes. A carbon tax would be hard for most Republicans to swallow, especially if it is structured in a way that would cause their constituents more pain at the pump. And the fossil fuel industry, accustomed as it to receiving a $59 in subsidies for every $1 in campaign contributions and lobbying, will certainly have something to say about it.  So don’t hold your breath, but don’t rule it out either.

Special thanks to Chadbourne & Parke LLC for hosting a post-election webinar from which much of the information in this post was derived.

 

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64 comments

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3:28PM PST on Dec 16, 2012

There is a lot of propaganda going on around here. Big oil does NOT make obscene profits, they run about 4%. If you want to see obscene profits check out Apple.

Oil gets investment tax credits like all other industries, these are not subsidies, they are tax deductions. It is renewables that are getting huge subsidies, easily running 50-75%.

Big oil is NOT fighting green energy, BP was even selling solar panels until China made it unprofitable. It is nuclear, natural gas, and coal along with utilities that is fighting wind and solar.

The government gives you a 30% unlimited tax credit, if you want to see more solar panels, buy them.

5:40AM PST on Dec 10, 2012

thanks for sharing

9:23AM PST on Nov 29, 2012

Good post. Thanks.

3:49PM PST on Nov 28, 2012

Hi, Grace A., I was wondering if you could explain why you so persistently state that we should have to pay polluting industry to hold fossil fuels for later use, especially since they'd probably take the money and go after them anyway?

They need to begin to switch over to greener methods - and their obscene profits are gained at our cost, not to mention tax breaks and refunds drained out of taxpayers, while our health and ecology is destroyed because they object to covering basic costs of business, such as updating technology to reduce pollution, rather than offloading massive health and environmental costs onto the public and victims while using, as do all polluting industries (including GM and otherwise toxic food producers) the industrial victim blame strategy to attribute industrial diseases to our long-standing personal choices which signally failed to cause these ills prior to/in the absence of these various and increasing types and combinations of toxic industrial exposures and nutrient deficiencies in our factory farm/processed food diets.

Personally, I think the fossil fuel-related industries (and other huge corporations) should stand on their own two feet, quit being so dependent on government/tax-payer hand-outs, and start running their businesses like businessmen.

1:56PM PST on Nov 28, 2012

I hope to see solar panels more & more.

10:06AM PST on Nov 28, 2012

thanks

9:54AM PST on Nov 28, 2012

We need more rooftop solar and bird/bat safe wind energy.

11:49AM PST on Nov 27, 2012

Thanks.

4:56AM PST on Nov 27, 2012

Demand for energy is sufficiently inelastic that a tax on pollution including greenhouse gases, could if phased in gradually and dedicated to buying fossil fuel reserves to be held underground for the great grandchildren of today's children to inherit, could be slightly better for the fossil fuel firms than business as usual. Global Thermostat claims to capture and store carbon for somewhat less cost than the wholesale price for coal. Too big fossil fuel firms will DETEST that competition. Maybe better to tax all energy the same regardless of the source until all the fossil fuel reserves can be bought so the too big to fail fossil fuel firms won't be stuck with huge inventory overhangs of a product soon to be as obsolete as the buggy whip.

5:15PM PST on Nov 26, 2012

Darryll G. writes " i notice this doesn't say anything about the billions of dollars he has earmarked for green energy in his budget for next year, a budget that is up over 15% from last year, we're broke now ,where is he going to get the money, he'll probably just have more printed, instant increase in inflation." Gee, I know, why don't we take it out of big oil and big ag subsidies. They obviously don't need them anymore since they're raking in millions if not billions.

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