Congress -- Finally -- Gives Renewable Energy Breathing Room

Posted on October 3, 2008 by Dennis Pfaff

The renewable energy industry Friday finally got what it wanted from Congress, an extension of federal tax incentives considered vital to the future of wind, solar and other sources of power -- even though some parts of the industry seemed to be a little more equal than others.

On a 263-171 vote, the U.S. House approved a massive bailout of the country's financial system that also included the approximately $17 billion in renewable tax credits. The bill, which ended months of stalemate and uncertainty over renewable energy policy, went to President Bush, who immediately endorsed the legislation and signed it into law.

According to a summary of the bill's provisions, it treats major renewable sources significantly differently. It extends the current 30 percent investment tax credit for commercial solar installations, as well as similar tax breaks used by businesses and homeowners for eight years, until 2016. It also eliminates a $2,000 cap on residential solar installations. But the major incentive for wind, known as the production tax credit, got only a one-year extension.

In reacting to the bill's passage, Thelen LLP San Francisco energy partner Ellen L. Bastier (pictured), who has been representing alternative energy companies for more than 20 years, noted the differing treatment for wind and solar:

"Today the renewable energy industry, particularly solar, can exhale. The extension of these federal tax incentives should help the industry establish itself as a permanent part of the nation's energy picture. Obviously, there is still a lot more work to do regarding wind; the industry will have to go through this again in a matter of months."

Nevertheless, she said, the credits should boost the confidence of companies to make new investments, to put money into long-term research and development toward new technology and will help renewable energy compete with fossil fuels.

The wind industry would also clearly like to see a longer extension, of its tax credit, which goes to project owners based on the amount of electricity they produce. The credit now is about 2 cents per kilowatt hour. In a statement, Greg Wetstone, an official of its trade group, the American Wind Energy Association, praised the vote in favor of the credits, which he called "essential to the continued growth of wind energy." But he conceded more work lies ahead:

"We look forward to working next year with a new Congress and administration to fashion a serious long-term clean energy policy that increases domestic energy, increases our reliance on clean renewable energy, and creates jobs for Americans.” 

 

Julie Clendenin, a spokeswoman for the group, told Climate Law Update the wind industry wants to see a multi-year extension of the tax credits:

"We'll be starting early in the year on our policy agenda, with a more long-term focus so we don't have to do this every year."

Wind has enjoyed spectacular growth in recent years, according to the industry. And the federal government, which has set some lofty goals for the energy source, has noted that wind-generated electricity grew more than any other renewable source between 2005 and 2007.

Beyond wind, green technology in general also has been getting a lot of interest from venture capitalists, even in tough economic times.

Thelen's Bastier cited the broader context surrounding the tax credits:

"Renewable energy is one of the brightest spots in an otherwise challenging economy right now, so it's timely that the federal government has finally come around to renewing this crucial support. Of course, there are other factors that have been helping to promote the industry, including state renewable portfolio standards, the rising cost of oil and the prospect of a price on carbon emissions. These tax credits should be among the final factors required to really spark the renewable energy industry's success in coming years."

Similarly, the solar industry trade group, the Solar Energy Industries Association, noted the potential economic impact of the extension in its enthusiastic response to Congress' action. The group's statement predicted the extension of the credits would help create more than 400,000 jobs. Said the organization's president, Rhone Resch:

“This bill is a major step in our long journey toward energy independence and ensures that solar energy will be a significant part of America’s energy future. This long-term extension of the solar tax credits will create a domestic solar industry with hundreds of thousands of jobs while providing clean, affordable, carbon-free energy to millions of American families, businesses, and communities.”

The Edison Electric Institute, representing the electric utility industry, also praised the passage of the bill, with its "particularly crucial" energy incentives.

Perhaps ironically, one of the few down notes came from the environmental community, which, while embracing the renewable energy credits, criticized provisions supporting "dirty" energy sources, such as tar sands and deriving fuels from coal. Said Carl Pope, executive director of the Sierra Club, in a statement released by the organization:

"It is outrageous that every time Congress tries to pass clean energy measures, the allies of Big Oil and Coal demand a ransom. The Sierra Club strongly objected to these provisions but while we regret the addition of these environmentally harmful provisions to the package, we nevertheless urged members of Congress to renew the urgently needed extensions of tax incentives to support clean energy and energy efficiency technologies."

Additional energy-related provisions of the bill include incentives for conservation, plug-in electric vehicles, cellulosic biofuels and carbon capture. Among other things, it also gives boosts to small wind turbines, biomass facilities, marine wave and tidal energy and geothermal equipment.

--Dennis Pfaff of Thelen LLP

 
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Renewable Tax Credit Extensions in Senate Bailout Await House Vote

Posted on October 2, 2008 by Dennis Pfaff

There were some signs Thursday that the huge bill that gained approval in the U.S. Senate the day before to fix the nation's financial mess -- and, by the way, to extend those long-stalled renewable energy tax credits -- might be headed for passage in the House.

The legislation, as outlined in a summary and a budget analysis coming from lawmakers, contains about $17 billion for such things as tax incentives for renewable energy, conservation, plug-in electric vehicles, cellulosic biofuels and carbon capture. It extends for one year the production tax credit for wind energy, and includes an eight-year extension for investment tax credits for solar energy projects. It also sweetens the tax breaks for residential solar investments.

Despite the apparent urgency of the bailout and the extension of renewable tax credits and other, unrelated, tax breaks in the bill, there still could be problems in the House. The New York Times' blog, Green Inc., examined how the politics of the energy tax breaks, and particularly the legislation's support for such activities as converting coal to fuel and refining the product of tar sands or oil shale might affect the critical House vote, expected Friday.

The Bush administration, meanwhile, strongly endorsed the legislative package, including its renewable energy provisions. At the same time, trade groups, such as the Solar Energy Industries Association, urged its members to contact their representatives in Congress to support the bill. The American Wind Energy Association also applauded the Senate action and asked for the House to approve the measure.

Of course, even despite the prodding from many sectors and the primary focus on the measure's larger economic implications -- the Bush administration called it "an expeditious response to a developing crisis in the nation's financial markets -- there was no absolute guarantee of passage.

As the Times blog pointed out, even relatively obscure issues could weigh on the bill. The measure, for instance, includes incentives for fuels made from coal, as long as it is processed at a facility that sequesters at least half the carbon dioxide emissions. It also gives a nod to refineries processing oil shale or tar sands. The House had rejected those provisions, which have also come under fire from environmentalists.

Wrote blogger Jad Mouawad:

"So the Senate's vote now puts the House in a bind. To ensure quick passage of the rescue plan, both chambers must approve identical bills. This means the House would have to hold its nose and approve the Senate's version -- despite the opposition of some lawmakers, who had opposed the earlier credits for non-renewables.

"The question now: What will the House do?"    

That, in fact, is a pretty good question. And one that undoubtedly will be of a lot of interest to anyone involved in the renewable energy industry.

--Dennis Pfaff of Thelen LLP

Photo credit: Strip mining tar sands, Alberta, Canada; Courtesy: U.S. Department of Interior
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Renewable Tax Credit Extensions Still Pending

Posted on September 24, 2008 by Dennis Pfaff

A day after legislation was overwhelmingly passed by the U.S. Senate to extend federal tax credits for wind, solar and other renewable energy sources the House had yet to act and it appeared the chamber would take yet another new look at the issue.

If nothing is done, the credits would expire at the end of the year.

The Senate approved its estimated $18 billion measure on Tuesday. Shortly thereafter,  Rep. Charles B. Rangel, D-NY (pictured), chairman of the House Ways and Means Committee, introduced his own and different version of the bill. It was not certain when the House would tackle the measure, despite earlier reports, such as a dispatch from Bloomberg, that lawmakers would act on the matter Wednesday.

Some key elements of both bills appeared to be identical. For instance, each would renew tax incentives for wind for another year and would give an investment tax credit for solar projects a new eight-year lease on life. They would also extend incentives for other sources, such as biomass, geothermal and marine, although for slightly different periods of time.

But the House version was valued at somewhat less than the Senate bill, $16 billion as opposed to $18 billion. Rangel, in a statement earlier in the week, had criticized the Senate measure -- which curtailed some tax breaks for fossil fuels in order to pay for the renewable incentives -- for still not doing enough to pay for the tax breaks:

“Sadly, they did not live within their means, and their bill would add billions to the national deficit at a time when we can hardly afford it. The House will soon consider, and pass legislation providing the Senate with an opportunity to pass and help enact these tax incentives, fully offset by the provisions they have already blessed."

The Senate measure had also come in for criticism from some environmentalists, such as the Sierra Club, for giving some tax breaks to industries involved in liquid coal, tar sands and oil shale. But the Bloomberg story had suggested that extending an incentive for refineries that can handle fuels such as those from Canadian tar sands was critical to reaching a compromise allowing the measure to move forward. The House version appears to drop those provisions, a Sierra Club official told Climate Law Update on Wednesday.

It was not clear exactly when lawmakers would move on the legislation. On Wednesday, Rangel issued another statement saying that the new version would be up for a vote by the full House in "the very near future."

On Wednesday, Sen. Max Baucus, D-Mont., the chairman of the Senate Finance Committee, who spearheaded support for the Senate bill, prodded his House counterparts to move forward. In a statement, Baucus said:

“We know this bill can be a bipartisan solution for the entire Congress because it reflects bipartisan success here in the Senate with a majority of 93-2. This is something both parties on both sides of the Hill can agree on, and I’m calling on the House to cut through the noise, come together and swiftly pass this legislation to get help to businesses and families back home.” 

In addition, an industry group, the American Wind Energy Association, issued a call for its members to urge the House to approve the bill.

Efforts to extend the tax credits have been tied up in Congress for months. Lawmakers are expected to end their pre-election session of Congress on Friday.

--Dennis Pfaff of Thelen LLP

Photo: U.S.  Rep. Charles B. Rangel; Courtesy: Congressional Pictorial Directory 
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