Finance Panel Examines Efficacy of Renewable Energy Tax Incentives

The Senate Finance Subcommittee on Energy, Natural Resources, and Infrastructure on March 27 heard testimony on how recent and pending expirations of energy tax incentives affect deployment of renewable energy facilities, energy efficiency measures and advanced biofuels. Much of the focus was on the credit for wind energy, which expires at the end of 2012.

“At a crucial time when we need to be giving our economy a boost, we should not be allowing very important job-creating incentives to expire,” said Subcommittee Chairman Jeff Bingaman, D-N.M., in his opening statement.

In December 2011, Bingaman chaired a similar hearing to consider the effects of short-term extensions and frequent expirations on the renewable energy industry. Almost all of the witnesses argued that intermittent incentives severely stunt the promise of clean energy in the United States, and illustrated how the constant threat of expiration prevents the build-out of a growing manufacturing sector and supply chain.

Ethan Zindler, a policy analyst with Bloomberg New Energy Finance, again noted that the Production Tax Credit (PTC), which benefits primarily the wind industry, has expired three times in the last dozen years. “On each occasion, the result has been a sharp drop in new installations,”said Zindler. He pointed out that the industry today finds itself under pressure from low electricity prices due both to relatively weak economic conditions and to unusually cheap natural gas, which presently is trading at its lowest level in two decades. He said the expiration of the PTC would add a third negative factor.

According to wind energy executives, the PTC has allowed the wind power industry to undergo tremendous growth and innovation. “Wind energy now provides 3 percent of electricity in the U.S.,” stated John Purcell, vice president – wind energy, Leeco Steel, Lisle, Ill. “The wind industry is on the verge of becoming competitive without PTC, but failing to extend PTC immediately will prevent producers from finishing the job,” Purcell said.

Not all of the witnesses supported the tax incentives. Dr. Benjamin Zycher, a visiting scholar at the American Enterprise Institute in Washington, D.C., said renewable power generation has achieved only a small market share in the U.S. “Official projections are for slow growth at best, notwithstanding large subsidies and other policy support,” said Zycher. The subsidies and mandates that have been implemented in support of renewable electricity impose nontrivial costs upon the taxpayers and upon consumers in electricity markets, he added. Zycher predicted that ongoing supply and price developments in the market for natural gas are likely to weaken further the competitive position of renewable power generation.

John P. Ragan, vice president of business development and government affairs, TPI Composites, Scottsdale, Ariz., urged Congress to work on a long-term extension of the PTC as it considers overall structural reform of the tax code. “Our hope is that industry and Congress can work together to reevaluate the PTC in a manner that enables the wind industry to continue its rapid growth as we chart a course to providing 20 percent or more of our nation’s electricity from wind by 2030.”

By Jeff Carlson, CCH News Staff

Testimony of John Purcell, Leeco Steel

Testimony of John P. Ragan, Vice President of Business Development and Government Affairs, TPI Composites, Inc.

Statement of Dr. Benjamin Zycher, Visiting Scholar, American Enterprise Institute for Public Policy Research

Testimony of Ethan Zindler, Bloomberg New Energy Finance

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