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

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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