This piece was co-authored by SACE staffer Alissa Jean Schafer.
Over the past four years, congressional disfunction has been the rule, as opposed to the exception. But early Wednesday morning, congressional leaders proposed a sweeping bill that would not only provide essential funding for government functions, but also includes long-term support for renewable energy.
Historically, the wind energy industry has received a federal incentive called the Production Tax Credit (PTC); however, that tax credit needed approval almost annually because it was extended on a year-by-year basis. In some years, Congress just forgot about the tax credit and the installations of new wind farms would plummet the following year. The solar energy industry has fared a bit better, but with the federal Investment Tax Credit (ITC) for solar expiring in 2016, that industry would have faced similar market uncertainty. Compare this congressional disfunction towards renewables to the fossil fuel and nuclear industries. Those industries have substantial subsidies baked into the federal tax code and haven’t had to deal with the level of uncertainty faced by renewable energy industries.
On Wednesday, Speaker of the House, Rep. Paul Ryan (R-WI), introduced the “Consolidated Appropriations Act, 2016″. As a part of the 2,009-page bill, wind energy and solar energy will now have a long-term federal incentive. It’s important to note that this policy certainly isn’t a hand-out. Congress is gradually phasing-out the federal incentives for wind energy and solar power between now and 2022/2024 (respectively) – something the fossil fuel and nuclear industries are not guaranteed to do. Wind and solar power prices have become so cost competitive, market analysts expect that renewable energy resources won’t need the federal tax incentives after they expire.
According to the American Wind Energy Association, “the Production Tax Credit and alternate Investment Tax Credit would be extended for 2015 and 2016, and continue at 80 percent of present value in 2017, 60 percent in 2018, and 40 percent in 2019. As before, the rules will allow wind projects to qualify as long as they start construction before the end of the period.”
For the solar energy industry, the ITC will be extended until 2020 and continue at 26% of the total investment cost in 2020 and 22% in 2021. Similarly, solar projects can qualify as long as they commence construction. But, projects that are not placed in service by 2024 will receive a 10% ITC. (You can read the full-text of the bill here, with the renewable energy incentives language beginning on page 2002).
Congressional leaders plan to vote on the entire budget deal as early as Friday. Because the wind energy and solar power incentives are just a portion of the massive bill, there is still a risk that renewable energy could be stripped from the bill.
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