Update December 18, 2015: The final bill passed both the U.S. House and Senate. President Obama is expected to sign it shortly.
Tuesday December 15 was a good day for U.S. renewable energy
companies. In a landmark deal that could mark the first time the Senate
and House Democrats and Republicans under Barack Obama were able to
compromise on anything at all, the two parties released an omnibus spending bill that lifts the 40-year U.S. oil export ban and gives a five-year extension of renewable energy tax credits for wind and solar.
Solar Industry Exuberant
The bill extends the Investment Tax Credit (ITC) for solar until
2021. It was originally expected to sunset at the end of 2016, which
was forcing developers to rush to finish projects. In a session last
week during Renewable Energy World Conference and Expo, Julie Ungerleider of Coronal Group explained that because of the hard stop that the ITC created,
solar projects that were not already “fully baked” were unlikely to be
able to be built by 2016. She said material shortages were rampant with
the rush to build now. This extension should relieve some of that
pressure.
The ITC will be extended until December 31, 2019 in its current form.
After that projects that start construction in 2020 and 2021 will
receive 26 percent and 22 percent, respectively. All projects must be
completed by 2024 to obtain these elevated ITC rates. For residential
solar, a similar tax credit phase-out applies until December 31, 2021,
after which the tax credit scheme ends.
"By extending the solar investment tax credit for five years with a
commence construction provision and a gradual ramp down, bipartisan
members in both Houses have reestablished America as the global leader
in clean energy, which will boost our economy and create thousands of
jobs across America,” said Rhone Resch, President of the Solar Energy
Industries Association, adding that the extension should enable the
industry to “achieve its pledge of employing 50,000 veterans by 2020, a
goal our industry takes very seriously. Resch believes that the extended ITC will enable more than $125 billion in new, private sector solar investment.
Wind Industry Gains Certainty in Stepped-Down Tax Credits
The ITC and production tax credit (PTC) for wind energy
projects ended at the conclusion of 2014 but “start construction”
language was added to bill at the last minute. That meant that wind
energy projects could still claim the credit if they had begun
construction by the end of 2014 and were completed by the end of 2016 —
this lead to lengthy discussions and definitions
of what “commence construction” entailed. The new bill includes a
five-year retroactive extension of the previous bill and steps down the
tax credits through December 31, 2019.
Wind projects that begin construction in 2017 will receive an ITC/PTC
of 24 percent or 1.84 cents per kWh for the PTC; projects that begin
construction in 2018 will receive an ITC of 18 percent or 1.38 cents per
kWh and projects that begin in 2019 will receive an ITC of 12 percent
or .92 cents per kWh. These figures represent an ITC/PTC that “steps
down” by 20 percent each year. "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 Tom Kiernan, CEO of the
American Wind Energy Association. “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 industry leaders are examining the agreement now and
appreciate the progress. “If this passes, our industry will get a break
from the repeated boom-bust cycles that we’ve had to weather for two
decades of uncertain tax policies,” Kiernan said. “AWEA has sought
greater stability in the credit, with an extension for as long as
possible. This plan will drive more development, and near-term prospects
look strong – especially as utilities, major end-use customers, and
municipalities seek more low cost emissions-free renewable energy. In
order to keep the wind energy success story going, we will need to
continue to work with Congress and the White House in the years ahead to
level the playing field with other energy sources that receive
permanent tax support.”
Minor Wins for Biofuels, Too
The text of the bill also extends through 2016 the existing $1.00 per
gallon tax credit for biodiesel and biodiesel mixtures, and the small
agri-biodiesel producer credit of 10 cents per gallon. The provision
also extends through 2016 the $1.00 per gallon production tax credit for
diesel fuel created from biomass. The provision extends through 2016
the fuel excise tax credit for biodiesel mixtures. It also extends through 2016 the 50 cents per gallon alternative fuel tax credit and alternative fuel mixture tax credit.
Trading Renewables for A Lift of the Oil Export Ban
While the renewable energy industry cheered the new bill for the tax
credit extensions it offers, climate change activists are not as
convinced of its efficacy. Just one week ago, more than 185 world leaders united in agreement to cap carbon emissions
at the COP21 negotiations in Paris. Many in the industry called this a
landmark occasion as it was the first time in history that major carbon
emitters such as the U.S. and China agreed to do something to limit
carbon.
Bill McKibbon, founder of climate group 350.org wrote in an op-ed in
The Hill that lifting the oil export ban just one week after countries
agreed to limit carbon emissions was akin to holding the launch of a
vegetarian cookbook in a steakhouse. The bill has not cleared both houses and while it looks good,
renewable energy advocates are urging U.S. renewable energy industry
stakeholders to contact their representatives and urge them to vote in
favor of the bill. The House could vote on the bill as soon as Thursday
and the Senate shortly thereafter.
http://www.renewableenergyworld.com/articles/2015/12/making-sense-of-the-itc-extension-for-wind-solar-and-bioenergy-too.html
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