Wind, Solar Split On Energy Tax Reform Plan

on December 19, 2013 at 4:00 PM
Senate Democrats Address The Press After Their Weekly Policy Luncheon

Sen. Max Baucus (D-MT) talks with a reporters before attending the weekly Senate Democratic Caucus policy luncheon at the U.S. Capitol

A proposal to tighten up the U.S.’s mess of 42 different energy incentives – more than two dozen of them short-term measures that frequently roil the markets as they expire or near expiration – is drawing a split reaction from the nation’s two largest renewable energy sectors.

The American Wind Energy Association commended Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, “for putting forward a sound policy option to provide domestic energy producers with stability for the years to come.” But the Solar Energy Industries Association said it was “very concerned” with aspects of the plan that Baucus floated.

image via Shutterstock

image via Shutterstock

A look at the plan explains the different reactions: Wind would likely maintain that production tax credit that it sees as essential in the near-term, while the investment tax credit for solar would shrink. The industry would also lose lucrative accelerated depreciation provisions.

Thus the SEIA’s warning that “reducing the solar Investment Tax Credit (ITC) and dramatically altering the way companies depreciate their assets could jeopardize future clean energy development in the United States.”

At the heart of the Baucus plan is an attempt to whittle the many different energy-related tax incentives down to “two simple, technology-neutral” devices, one for “clean electricity” (which companies could take as a production tax credit or investment tax credit), another for “clean fuels.” It’s a fairly simple-sounding, broadly focused approach, amounting, one might say, to an energy policy, something the U.S. has never really had.

The law wouldn’t name any particular type of technology, but would leave it to the Environmental Protection Agency to determine the emissions that resulted from the electricity generation or fuel use. Any generation facility or fuel 25 percent cleaner than average would get a tax credit, and the cleaner the facility or fuel, the larger the credit.

Greens would like some of the goodies that would be lost under the plan, but recoil at others:

  • Section 25C credit for residential energy efficiency
  • Section 30B credits for fuel cell motor vehicles
  • Section 30D credits for electric plug-in vehicles
  • Section 43 credit for enhanced oil recovery costs
  • Section 45I marginal well production credit
  • Section 45N mine rescue training credit
  • Section 45Q carbon dioxide sequestration credit
  • Section 45L credit for construction of energy-efficient new homes
  • Section 45M credit for energy efficient appliances
  • Section 48C credit for investment in advanced energy property
  • Treatment of gain resulting from Federal Energy Regulatory Commission restructuring

Baucus did suggest that there was another possible direction to go with reform: “An alternative would be to discourage energy production that is not clean.” This is another way of saying carbon tax, which economists generally believe to be the most efficient way to point the economy toward less harmful emissions (and which would cut the deficit more than any other single tax reform, according to the non-partisan Congressional Budget Office).

As for what happens with the Baucus plan, the conventional wisdom is not much, at least not in the near future.

“His proposal is unlikely to go anywhere anytime soon,” Politico wrote. “The push for tax reform has stalled in Congress, and his latest proposal would gut scores of incentives with broad bipartisan support among his colleagues. But it’s intended to jog the tax-reform debate.”