Credits to Spur Renewable Energy Sources Seen Set to End: Taxes

October 24, 2013 by  
Filed under Green Energy News

Tax credits for the production
of wind power and other renewable energy sources face expiration
at year’s end amid few signs Congress will decide to continue
them, tax lobbyists and other analysts say.

Failure to extend the 16 tax credits could stymie the
development of wind power and the other renewables by
undercutting incentives to invest in them, Bloomberg BNA
reported.

Neither of the tax-writing committees in the House and
Senate have yet to mark up a legislative package to extend the
provisions, with time running short before they expire Dec. 31,
energy analyst Kevin Book said.

“It’s pretty telling” that “there is still no draft, no
amendment has come up for a vote” on the extension, said Book,
the managing director of research for ClearView Energy Partners,
a Washington-based consulting firm.

“A better than average probability” exists that the
expiring tax credits will be allowed to lapse, Book said, though
he predicted they would be retroactively reinstated at some
point in 2014.

In addition to the 2.3 cent-per-kilowatt-hour tax credit
for wind, geothermal and closed-loop biomass, other expiring
energy incentives include a $1 per-gallon credit for biodiesel
producers, a $1.01 per gallon credit for cellulosic ethanol and
multiple credits for energy-efficient homes and appliances.

Congress extended the energy credits through 2013, at a
price of $18 billion, as part of the measure enacted Jan. 1 that
averted income tax increases for most Americans — the so-called
fiscal cliff — that were set to take effect with the new year.

‘A Fluke’

At this point, no comparable must-pass legislation is a
likely home for the tax credits, analysts said.

“Last year was a bit of a fluke because we had the ‘cliff’
deal and it was possible to include them in the larger
package,” said Amit Ronen, previously deputy chief of staff to
Senator Maria Cantwell, a Washington Democrat and member of the
Senate Finance Committee.

“It’s hard to imagine how an extenders package comes
together in this political environment,” said Ronen, director
of George Washington University’s Solar Institute. “Clean
energy in particular — there is less and less appetite to keep
extending the current regime.”

Some Finance Committee member — including its top
Republican, Senator Orrin Hatch of Utah — remain optimistic
that, as in previous years, a way will be found to extend the
tax credits.

“I suspect we will wind up with something,” Hatch said in
an interview.

Code Revision

Still, clouding those prospects is the push by the finance
panel’s chairman, Democratic Senator Max Baucus of Montana, and
the head of the House Ways and Means Committee, Republican
Representative Dave Camp of Michigan, to revise the entire tax
code
.

“I think it’s all the more reason we need tax reform, to
get extenders included in comprehensive tax reform,” Baucus
said in an interview.

“Let’s get tax reform done; that’s where we should begin,
and that’s where we should place our focus,” he said.

Efforts to pass a separate bill extending the energy tax
credits could be interpreted as a sign that the code revision
push by Baucus and Camp was waning, analysts say.

“The committees are both wholly focused on accomplishing
tax reform this year, and that conversation is certainly
crowding out consideration of shorter term measures,” Derek
Dorn, a partner at the Washington-based law firm Davis Harman
LLP, said in an interview. Dorn previously served as staff
director of the Senate Finance Subcommittee on Energy, Natural
Resources and Infrastructure.

‘Severe Impact’

Even as Book predicts that the tax credits would be
retroactively reinstated, “a lapse could go for a while,” he
said. Dropping them, he said, “will have a severe impact on
some of the affected sectors.”

The wind industry is promoting its case for extending the
credits.

“Extension of the Production Tax Credit will let our
businesses plan and invest in further improvements in wind
technology, and keep bringing consumer costs down,” Peter Kelley, vice president of public affairs for the American Wind
Energy Association
, said in an e-mail.

The Washington-based trade group represents companies such
as GE Energy, the biggest supplier of wind turbines, and
Florida-based wind farm developer NextEra Energy Inc.

“We should not prematurely sunset clean energy tax
credits, since that would destroy investors’ expectations for
many projects currently being planned and destabilize already
fragile markets,” Kelley said.

‘De Facto Policy’

The tax code, he said, “is the de facto energy policy of
our country, and it’s working to drive the adoption of wind and
other renewables.”

Countering the AWEA’s efforts and lobbying to end the
credit for the wind industry is a coalition of groups that
include the American Conservative Union, the Club for Growth and
Americans for Prosperity, all of which promote limited
government.

A Sept. 24 letter from the coalition to lawmakers attacked
the credit. “The problems with bestowing government favors on
wind energy are myriad — it doesn’t produce cheaper energy, it
threatens electrical grid reliability, it’s inefficient, it’s
unprincipled tax policy, to name a few — and it’s time to end
this misguided handout,” according to the letter.

A House Oversight and Government Reform subcommittee has
scheduled an Oct. 2 hearing to focus on the wind production tax
credit, Representative James Lankford, an Oklahoma Republican
and the subcommittee’s chairman, said in an interview.

The wind industry, he said, says of the credit, “‘If we
just had two more years or three more years, we’ll be fine,
we’re almost there,’” Lankford said. “What is a reasonable
time for it to continue.”

To contact the reporter on this story:
Ari Natter in Washington at anatter@bna.com

To contact the editor responsible for this story:
John Sullivan at jsullivan@bna.com

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