Clean energy industries cheer inclusion in extenders package

Source: Nick Juliano, E&E reporter • Posted: Friday, August 3, 2012

Yesterday’s bipartisan Senate Finance Committee vote to renew a variety of expired and expiring tax breaks — including a key credit for the wind industry and a suite of incentives for alternative fuels and biofuels producers, energy efficiency programs and transit programs — drew cheers from industries that won extension of their incentives and raised optimism that the breaks would be included in a yet-to-be-unveiled House version of the package.

The panel approved the broad package of temporary provisions, broadly referred to as tax extenders, on a 19-5 vote. The package includes $17.5 billion worth of energy tax incentives, out of a total 10-year price tag of more than $205 billion. The largest energy credit in the package is a modified one-year extension of the 2.2-cent-per-kilowatt-hour production tax credit, which is set to expire at the end of this year for the wind industry. The production tax credit extension would cost $12.1 billion over the next decade.

“This bipartisan work is just what all members of Congress will need to do with the fiscal cliff looming and tax reform on the horizon,” Finance Chairman Max Baucus (D-Mont.) said in a statement after the vote.

The fate of the tax credit had been in flux until early yesterday morning, when Baucus unveiled the final draft of the extenders package. While wind industry backers cheered the inclusion of the credit and the bipartisan committee vote for the package, it remains to be seen how it will fare in the full Senate and the House.

Baucus said he hoped to have the package to the Senate floor soon but did not speculate when exactly that would be. He noted that the proposals passed out of committee yesterday first need to be converted into legislative language before the full Senate can vote on them. The bipartisan vote in committee could bode well for the measure’s chances of success in the full Senate.

Rep. Pat Tiberi (R-Ohio), who is spearheading the lower chamber’s extenders efforts, reiterated yesterday that his legislation will not be ready until after the November election.

Beyond just extending the credit, Baucus’ language would modify its requirements to expand its applicability without directly providing more than a yearlong extension. His provision would allow developers that “begin construction” on renewable energy projects by the end of next year to claim the credit, rather than requiring those projects to be “in service” by that date. Eligible projects still would not be able to actually claim the credit until they begin producing electricity

The Baucus language also would continue a provision in current law that allows wind developers to claim an investment tax credit, which covers 30 percent of a project’s costs, rather than the production tax credit. That move would primarily benefit small-scale community wind projects and offshore wind projects.

“We applaud the committee for this act of leadership to move critical policies forward in a difficult environment,” said Denise Bode, CEO of the American Wind Energy Association, in a statement. “This was an extremely important step to provide critical certainty to keep people at work in wind energy manufacturing and construction.”

Changing the eligibility requirements would allow more wind and other renewable energy projects to claim the credit, and it accommodates concerns from some in the wind industry that just giving a yearlong extension would be inadequate because an extenders bill is unlikely to pass before December. It typically takes about a year for wind developers to conduct site assessment and permitting work and about six months to construct turbines, industry sources said yesterday, meaning that developers could begin planning as soon as an extenders bill passes and still be able to count on receiving the incentive with the changed eligibility requirement.

On the offshore wind front, construction typically takes about two years, said Jim Lanard, president of the Offshore Wind Development Coalition. That means the credit as passed by the Senate could benefit projects that begin producing electricity in 2015 as long as construction begins by the end of next year. Lanard said projects that could begin construction by the end of next year include the utility-scale Cape Wind project off the coast of Cape Cod and two pilot projects: Deepwater Wind’s installation off Rhode Island and a Fisherman’s Energy project off New Jersey.

“I … appreciate my colleagues’ efforts, especially those of Chairman Baucus, on working with me on the extension of the wind investment tax credit,” Sen. Tom Carper (D-Del.) said in a statement. “While what was included in this package is a great start, I believe that in order to adequately support the growing offshore wind industry and to help it thrive, it is critical that the Investment Tax Credit for offshore wind is extended well beyond 2013, and I will work to see that long-term tax legislation happens.”

Other renewable sectors

The production tax credit and investment tax credit apply to a variety of renewable energy installations, and Baucus’ inclusion of the provisions drew cheers from other sectors, as well.

“This would be a great boost to geothermal projects,” said Karl Gawell, executive director of the Geothermal Energy Association. “Changing the deadline in the tax code from having power online to having a project under construction will allow new projects to move forward, which would otherwise have been stalled. This approach is much better for baseload technologies, like geothermal, which have longer lead times.”

In addition to the production tax credit and investment tax credit, the legislation included a variety of incentives for alternative transportation fuels and associated infrastructure, including biodiesel, cellulosic biofuels, compressed or liquefied natural gas and electric vehicles.

“By extending the cellulosic biofuels producer tax credit and accelerated depreciation allowance for cellulosic biofuel plant property, and by adding algae-based biofuels to these two sections of the code, this proposal sends an important signal to investors that Congress continues to support the key role these technologies must play in securing our energy future,” Biotechnology Industry Organization President and CEO Jim Greenwood said in a statement.

Brooke Coleman, executive director of the Advanced Ethanol Council, said her group welcomes the coming debate over comprehensive tax reform and more intense review of all energy incentives.

“But until that day comes, it is critical to maintain stability in the marketplace for emerging industries,” Coleman said in a statement. “This strong, bipartisan vote sends a strong signal to the marketplace that Congress understands the urgent need to address these expiring credits, and we look forward to getting these incentives extended as soon as possible.”

The package also would extend some key energy efficiency credits that lapsed last year, including those aimed to encourage home weatherization, efficiency in new home construction and efficient appliances.

“Recent experience shows that energy tax extenders work,” said Kate Offringa, CEO and president of the Council of the North American Insulation Manufacturers Association. “Home and business owners have come to rely on these incentives to invest in greater levels of insulation, which leads directly to grass-roots job creation for thousands of contractors and construction workers who have been hit hard in recent years. Congress needs to move quickly in getting tax extender legislation onto the president’s desk.”