Green Options

The $3 billion in grants are designed to temporarily replace the production tax credit that has been a critical factor in the growth of renewable energy capacity in U.S.

Whether the global credit crunch will actually help or hurt the search for solutions to climate change is becoming a debatable issue.

Currently, the issue of climate change appears to be on the back burner as governments are focused on the financial problems that have shaken the global economy. It could be several months before politicians return to focusing their attention on long term problems like global warming.

The green economy shows signs of rebounding faster than others shaken by the global financial turmoil. There are several indicators pointing to the fact.

Given the hue and cry that has been unleashed in America with regard to the bailout, there is finally good news for the renewable energy industry. The Emergency Economic Stabilization Act of 2008, passed by the House of Representatives and signed into law by President George Bush immediately afterwards, extends investment and production tax credits for the wind and solar industries. The extensions will be partly paid for by a change in the tax code for the oil and gas [...]

While in Aspen last week for a fundraiser at the Aspen Institute, Republican Presidential hopeful John McCain met for breakfast with Texas billionaire oil man turned wind energy advocate T. Boone Pickens. Asked specifically if he was for renewing tax breaks for wind and solar that expire this year, he surprisingly said, “of course.”

For the second time this week, the Senate has voted to block progress on a bill designed to extend Renewable Energy Tax Credits. Although the Bill, that enjoys broad cross-party support, gained a majority of 52-44, Republican opposition meant that it fell just short of the 60 votes needed to proceed.

News that progress on the $17.7 billion package of tax breaks could now be delayed until after the presidential elections in November has been greeted with dismay by the renewables industry. Rhone Resch, President of the Solar Energy Industries Association warned that if the tax credits were allowed to expire at the end of this year it will “result in the loss of billions of dollars in new investments in solar.”

In a blistering attack, Nevada’s Republican senator John Ensign has launched an offensive against solar energy lobbyists, ahead of a crucial vote on renewable energy tax credits.

Breaking ranks with the the state’s increasingly important solar industry, Ensign said that efforts by the Solar Energy Industry Association to force his hand on tax breaks had in fact had the opposite effect of “personally alienating” him and other senators.

In a scathing letter, later released to the press, Ensign accused the lobby group of squandering goodwill by accusing him of favouring “billionaire hedge fund managers” over job creation in Nevada. Indicating the depth of his feelings on the issue, he went on to say “It is rare to have such overwhelming bipartisan support in today’s political climate but the solar industry had it and your association’s leadership squandered it.”

Nevada solar executives had privately become increasingly unhappy with the Senator’s record of voting against bills containing the tax credits. Ensign said that he opposed the bills because the funds for tax breaks would have been raised by increasing the burden on the oil and gas industry. Earlier this spring, he co-sponsored an alternative approach, calling for tax credits without the corresponding offsets. It made it through the Senate by a vote of 88-8, but has become bogged down in the House.

[UPDATE 1: The Consumer First Energy Act which would impose a 'windfall profits tax' on big oil companies, and the Renewable Energy and Job Creation Act both failed to move on. The second of those two contained a one year extension of the Production Tax Credit. The votes were largely along party lines. Kate Shepard at Grist provides a good review of the two bills in this report.]

The PTC has been the single biggest policy driver of renewable energy development in the U.S., and the short one and two year extensions (as well as the absence of those extensions) have produced a ‘feast-or-famine‘ cycle of renewable energy growth in the United States, where all new development is virtually frozen in place, awaiting a tax incentive. As it currently stands, the PTC will expire at the end of 2008.

According to the American Wind Energy Association (AWEA), studies show that 116,000 jobs and more than $19 billion in clean energy investment are at risk from a failure to extend the PTC and other renewable energy tax credits.

Thus far, the biggest hangup for extending the renewable energy tax credits has been the question of funding. Ironically, the Democrats have become the party of fiscal responsibility in Congress, and do not want to pass the bill without a way to pay for it.

Last week at WINDPOWER 2008, I had the opportunity to sit down with Greg Wetstone, Senior Director of Government and Public Affairs for AWEA, and Tom Gray, the Deputy Executive Director. The pair told me that the tax credit issue was really one of fiscal ideology. And that unfortunately, many in Congress had been using the renewable energy tax credits as a “political football.”

By an impressive tally of 88-8, the Senate approved The Clean Energy Tax Stimulus Act (S.2821) as an amendment to HR.3221, which aims to mitigate the economic impact of the current housing crisis.

The renewable energy tax credits were slipped into a housing bill that that did not end up looking the way its lead author, Sen. Chris Dodd really intended it to, remarking earlier in the week that it was “a housing bill, not a Christmas tree.”

However, will the production tax credit and investment tax credit ever make it to the President’s desk to sign?

But is the bill different enough to pass?

As was reported at Hill Heat, and elsewhere, Senators John Ensign (R-NV) and Maria Cantwell (D-WA), led a bipartisan group of senators in announcing a bill to incentivize the development of renewable energy and expand energy efficiency in buildings, homes, and appliances. The Clean Energy Tax Stimulus Package of 2008 (pdf) will provide some certainty to investors and those individuals and businesses that are considering adding solar, wind, biomass, methane capture, or other clean energy technologies.

Teetering on the brink of passage

Renewable Energy tax packages always face trouble in the Senate, and this dates back to our first energy crises in the 1970s. In a more recent example, a tax package failed repeatedly on the Senate floor, including a $22 billion version that fell one vote short of winning approval as an amendment to a broader energy bill in December. Many Republicans balked at the funding mechanism for the previous renewable energy incentives because they rescinded tax breaks from the big energy companies (which was spun by the right as a “tax increase.”).

The Solar Thermal Edition

In my first post about the feast or Famine Cycles of American Clean Energy Development, I discussed renewable energy more broadly and used the example of wind to show my point. I also touched upon the up and down nature of federal funding for renewable energy deployment in the late 70s and early 80s. With that said, the following examination adds some more context with a historical-institutional perspective of what went down in the early 80’s, how, and why. And in the spirit of some of the earlier posts this week that covered the technology of solar thermal, and the practical application of solar thermal technology to entire neighborood developments, I have decided to follow suit by writing about solar thermal as well. I hope to show that the decline and slow fazing out of federal support for solar thermal research and development during the Reagan and George Bush administrations has had a substantial effect on where the industry is today.