US lawmakers in Congress have introduced bills for a five-year extension of the 30% solar investment tax credit (ITC) and one more year of the wind production tax credit (PTC) at the present 40% through 2020, although both face a difficult climb for passage.

The ITC extension drafted in companion bills in the House of Representatives and Senate are bipartisan and have support of the Solar Energy Industries Association (SEIA), the industry’s leading national trade association, and some project developers and supply chain officials.

“These bills are clear, easy wins members of Congress can deliver to their constituents that create jobs, bolster the economy and address climate change," SEIA chief executive Abigail Ross Hopper claimed in a statement.

The ITC, worth 30% of a project’s capital cost, begins to phase down next year to a permanent 10% for commercial-scale projects on 1 January 2023.

The PTC has been phasing down on an 80%-60%-40% schedule since 2017 and is set to sunset at the end of this year.

The House initiative to prolong it at 40% for another 12 months came from majority Democrats in the powerful Ways and Means Committee, which has jurisdiction over taxation, and was apparently not sought – at least formally – by the wind industry.

It was inserted during “mark-up” of an extenders bill that would continue certain tax breaks and credits for a host of special interests.

“It’s not super clear how helpful that provision would be in terms of project finance,” Greg Wetstone, chief executive of the American Council on Renewable Energy (ACORE) said on a “State of the Industry” webinar hosted by the Washington, DC-based advocacy group. He was referring to tax equity investment – a key funding source for wind and solar.

In late 2015, Congress renewed both the PTC and ITC for five years with the understanding that would be the last one given both solar and wind were maturing industries and increasingly cost-competitive with other energy sources.

Moreover, wind development had been underpinned by the PTC for 24 years which lawmakers thought was enough. In contrast, the solar ITC was barely a decade old. Partly for that reason, they left the ITC in place beyond 2022, albeit at 10% but not for residential projects.

All that was acceptable to the solar and wind industries and their supporters who expected the renewables-friendly Democrats to remain in the White House.

Instead, Donald Trump won the 2016 presidential election and proceeded to axe his predecessor’s Clean Power Plan, promote fossil fuels for electricity generation, and encourage both federal agencies and state legislatures to subsidise uneconomic coal and nuclear plants. Ohio this week became the first state to do so with taxpayer money.

Equally bad, fossil fuels continue to benefit from billions of dollars in federal subsidies written into the tax code that neither political party has shown much willingness to reduce, much less remove.

This will leave the playing field very uneven for renewables next decade which is why supporters of wind and solar subsidies argue they should continue. But not everyone thinks subsidies alone are the answer to gain political backing for renewables.

“To get bipartisan support we should not think about subsidies as a policy driver. There needs to be a lot more emphasis on this as a win-win. This isn’t just about renewable energy. It’s also about bringing cheaper power. Wind and solar provide huge economic benefit,” Tom Buttgenbach, chief executive of 8minute energy renewables, told the REFF Wall Street conference last month.

Separately, the ITC for offshore wind is also expiring this year just as the sector is starting to develop scale in the northeast and mid-Atlantic region. Several bills seek to extend it but their fate is uncertain despite Trump in favour of offshore wind for national security reasons.

Other tax credits, climate measures

Meanwhile, lawmakers are also introducing bills to support allied technologies such as technology neutral tax credits for low carbon energy sources, carbon and climate taxes, and a 30% ITC for energy storage.

“We have been pushing hard on this provision and making some progress. We’re hoping to bring this to a good conclusion this fall,” Todd Foley, senior vice president for policy at ACORE, said on the webinar, referring to storage.

Wetstone, however, was cautious about chances for passage of tax incentives in “today’s less than functional legislative partisan climate” as he described Congress.

Some of the bigger efforts such as imposition of a carbon or climate tax and technology-neutral credits are long-term and unlikely this year. “I tend to kind of think that way about major credit extensions for wind and solar as well,” he said.

Wind

US lawmakers look to extend federal wind and solar tax credits