Tax extenders drive emissions down, generation up — DOE

Source: Christa Marshall, E&E reporter • Posted: Tuesday, February 23, 2016

Renewable energy tax credits extended last year would give a dramatic boost to clean energy generation through the early 2020s and make a “sizable” dent in decreasing greenhouse gas emissions, according to a new report from the Energy Department’s National Renewable Energy Laboratory.

While many prior studies have examined the general effects of solar and wind tax credits, few have examined the specific impact of the December 2015 extension, according to NREL’s Trieu Mai, co-author of the study. The researchers examined how two different natural gas price scenarios would affect renewable deployment and concluded the tax credits make a difference in both cases, at least through the early part of the next decade.

Over time, other factors — such as future gas prices or the Clean Power Plan, if it is enacted — may have a stronger influence as the tax credits ramp down.

The report shows “these tax credits are hugely important over the next five-plus years and will provide a bridge to the Clean Power Plan,” said Dan Utech, deputy assistant to the president for energy and climate change, on a conference call with reporters that also included leaders from the solar and wind industry.

The NREL team found that the 2015 tax credit extensions would drive a net peak increase of 48 to 53 gigawatts in installed renewable generation capacity through the early 2020s, with wind and solar making up most of the growth. Cumulative reductions in CO2 emissions through 2030 due to the tax credits would range from about 540 million to 1.4 billion metric tons (595 million to 1.5 billion tons), depending on a higher or lower natural gas price scenario.

In general, the analysis concludes that higher gas prices lead to more renewable generation compared with lower gas prices. But at the same time, higher gas prices allow smaller long-term impacts of the tax credit extensions themselves because renewables are more competitive in the long term when gas prices are low.

Higher gas prices, therefore, lead to lower CO2 emissions of about 540 million metric tons from tax credit extensions, compared with reductions of 1.4 billion metric tons under low gas prices, according to NREL’s analysis.

“The impact of the renewable tax credits are more short-lived” with high gas prices, said Mai.

The research has some limitations in its scope, according to Mai. For example, it doesn’t consider the cost impacts to ratepayers or the full effect on the renewable supply chain.

The NREL report followed an analysis from GTM Research and the Solar Energy Industries Association out today that found the U.S. solar industry installed a record 7,286 megawatts in solar photovoltaics last year. That record was the first time solar surged past new natural gas capacity, with solar supplying about 29.5 percent of all new electric generating U.S. capacity last year, the groups said.

The surge occurred despite current low natural gas prices, said Rhone Resch, president and CEO of the Solar Energy Industries Association. “Regardless of what the natural gas price is in future years, we know we’re going to be competitive,” he said.

The 2015 extensions expanded solar and wind tax credits for five years from their prior scheduled expiration dates, but there will be a “ramp down in tax credit value” during the latter years of that time frame, NREL noted.

Click here to read the NREL study.