Renewable Energy Leaders Urge Congress, Bush to Extend Tax Credits Quickly

Citing the possibility of job losses by the hundreds of thousands and the impact on a weakening economy, leaders of four major U.S. renewable energy trade associations Tuesday called on Congress and President Bush to extend production and investment tax credits that renewable energy developers, their financiers, and local and state governments are counting on to generate tax revenues and cleaner electricity.

“Already, we are seeing sales and new project announcements drop off,” the associations declared in a rare joint statement at a news conference. The associations include the American Wind Energy Association (AWEA), Solar Energy Industries Association (SEIA), National Hydropower Association (NHA) and the Geothermal Energy Association (GEA).

“In the absence of immediate legislative action,” the statement continued, “Congress will be raising taxes on clean, domestic, renewable energy sources and will undercut one of the fastest growing segments of the U.S. economy. With the nation facing a possible recession, it is difficult to imagine a worse time to destabilize America’s rapidly growing renewable energy sector.”

Coming on the heels of Tuesday’s 0.75% reduction of the discount rate by the Federal Reserve and a declaration by Treasury Secretary Henry Paulsen that an economic stimulus package needs to be simple and short-term, the call for long-term extensions may be a tough sell for renewable energy advocates. But Linda Church Ciocci, Executive Director of the National Hydropower Association, said “if there is a better way or another way of doing it quickly, we’re certainly open to that.”

Rhone Resch, President of the Solar Energy Industries Association, tried simplifying it for lawmakers: “Do you want to write them (consumers) a check, or do you want to give them a job?”

Resch highlighted 80 utility-scale solar projects on the drawing boards collectively representing about 56,000 megawatts (MW) of electricity generating capacity, more than 20,000 permanent jobs and hundreds of thousands of construction jobs. “None of these projects will be built unless the investment tax credit is extended,” he said.

For workers in Michigan where the automobile industry continues to unravel, the risks are in sharp focus for solar companies such as Hemlock Semiconductor, which Resch said has invested one billion dollars to expand plant capacity in Midland; ditto for Unisolar, a thin-film manufacturer that is creating hundreds of new jobs for six plants planned in Greenfield.

Randall Swisher, Executive Director of the American Wind Energy Association, said “major wind farm development companies are telling us that investment is drying up and they are being forced to put large projects in the pipeline for construction next year on hold.”

Swisher told reporters that AWEA estimates about 75,000 jobs are now at risk, including more than 32,000 in the direct manufacture, construction and operation of wind energy facilities.

In 2007, the wind industry shattered previous record additions of wind capacity by installing more than 5,200 MW, an increase of 45% and representing an investment of more than $9 billion in the U.S. economy.

The production tax credit for wind facilities has expired three previous times over the past ten years: after 1999, 2001 and 2003. In each instance, capacity additions the ensuing year dropped at least 73%. (See chart above.)

Under the provision due to expire at year-end 2008, an income tax credit of 1.5 cents/kilowatt-hour is allowed for the production of electricity from qualified wind energy facilities and other sources of renewable energy. Adjusted for inflation, the current value of the credit is 2 cents/kilowatt-hour of electricity produced. It is useful only for utility-scale wind turbines. It does not apply to small turbines used to power individual homes or businesses.

The solar industry is seeking an eight-year extension of the 30% business investment tax credit and a six-year extension of the 30% residential investment tax credit, along with the elimination of an existing $2,000 limit on the residential credit. The industry also wants to eliminate the public utility exception to the investment tax credit and allow corporate and individual taxpayers to claim it against the alternative minimum tax, which is affecting more and more taxpayers each year.

During the buildup to passage of the new energy bill last summer, it once appeared that production tax credit for wind and investment tax credit for solar would find a way into a compromise. But both ended up on the cutting room floor in December. How might this year be different?

“The reason we were not in the energy bill at the end of the day had nothing to do with any lack of support for solar, or for wind, geothermal or hydro. It had to do with how that tax title was structured,” Resch said. “When you go and survey Congress,” he continued, “there are very few people who would stand up and say, ‘I don’t support these industries.’ 85% of the public supports the federal government extending these tax credits.”

“When you start to look at how is this going to get done, the answer really becomes, it’s a matter of politics and making sure that the bills that are put forth are going to get through this year. We’re very hopeful that as leadership starts to structure both an economic stimulus bill or perhaps an energy tax title, they’ll do it in a way that passes these tax credits early in the first quarter and not wait until late in the year,” Resch said.

Karl Gawell, Executive Director of the Geothermal Energy Association, explained, “the biggest problem with federal energy policy is that it’s roller coaster. They like you one day, they don’t like you the next.”

Gawell said geothermal plants take between three years and five years to develop. “The guy who’s deciding today whether to start construction in February or March is looking at the deadline (expiration) looming at the end of the year because it’s going to take him two years or two and one-half years to finally get that project online.”

He counted 86 geothermal projects under development that are at risk in more than 12 states, representing 3,300 MW of electricity. That would more than double the industry’s current electric generating capacity.

Jim Pierobon is a communications consultant based in the Washington area with an emphasis on energy and climate issues.

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