While the presidential candidates are playing politics, the
utility world is demanding certainty. The paradox is that those
political positions come in two-to-four increments but power
companies are developing 30-year business strategies.
It’s the nature of democracies -- that candidates solicit
supporters, who are then positioned to influence ever-changing
rules. Implicit in the crafting of the tax code is the favoring of
one group over another. The fossil fuels are betting on one horse
while the renewable fuels are praying for another. Power companies,
however, should be immune from any interest group’s political
potency and more attuned to electrifying communities so that they
can prosper.
“Let’s talk about what is good for the electric system,” says Hugo
van Nispen, manager for North
America DNV Kema. “It is more responsible for economic growth
than oil and gas,” or any other option, for that matter, he adds.
How are those arguments playing out in the 2012 presidential race?
Unfortunately, says van Nispen, the candidates have allied
themselves with specific interests -- something that serves to
trivialize the debate and the true concerns at hand. The fact is
that each energy source has its place in the electricity eco-system
and that playing them off against each other is not the way
forward.
Utility officials must know society’s expectation of them: emission
reductions, reliability or costs, followed by 15-20 years of policy
certainty and the appropriate flexibility to achieve such aims. Only
then can the nation achieve a broader blend of fuel options, or an
all-of-the-above energy strategy. The production tax credit given to
wind, for example, has become a bargaining chip that results in an
unhealthy stop-and-go economic system, says van Nispen. Instead of
politicizing it, he says that government should create a path to
commercialization that is paved with dedicated tax incentives.
“There has not been a clear start and end to what those credits
should be accomplishing,” he says. “It makes sense for us as a
nation to pursue clean energy and to incent that with appropriate
tax incentives. If utilities and their partners understand the goals
and they are highlighted with clarity and time frames, the industry
will get there.”
Level Playing Field
President Obama is aligning himself with the green movement,
pointing out that wind and solar projects have doubled in size since
2008. He is also emphasizing that his policies have lent way to more
oil and gas production, although they have been tempered in the wake
of BP’s disaster and now come with stricter drilling regulations.
Nevertheless, to help wind and solar reach their potential, the
president would pay for their tax breaks by ending some incentives
given to oil and gas.
Meanwhile, GOP -hopeful Mitt Romney is trying to endear himself to
the fossil fuel industries. Part of his energy plan just released
says that the United States can be energy independent by 2020 if oil
and gas companies are allowed unfettered drilling access to public
lands while limiting the rights of environmental organizations to
sue to prevent such development. Romney would not renew the wind tax
credit but he would keep those breaks provided to oil and gas.
Fair? Sterling Burnett, senior fellow for the National
Center for Policy Analysis, says government incentives skew
national energy policy and that they should end for both the
renewable sector and oil and gas industries.
If the production tax credit is removed, Burnett says that the wind
energy industry is no longer a viable concern. The credit’s purpose
is therefore to increase market share while cleaning the
environment, he adds. Those objectives may only be possible if
energy storage is eventually commercialized, or the ability to
bottle and release the wind when it is not blowing.
As for oil and gas, it too gets some uncommon tax breaks and
benefits not given to other industries: Marketing efforts by the
Overseas Private Investment Corp. and national insurance that
protect against unexpected losses, like revolutions. The White House
has listed $4 billion in annual benefits it would like to see
removed
“If Romney wants to level the playing field, he should start with
ending all subsidies -- anywhere government is literally paying out
money for activities that companies should be doing themselves,”
says Burnett. “In doing so, we will save the treasury money and we
will also be able to say that we are not playing favorites. No
question: It will be difficult.”
Actually, it will be nearly impossible to cleanse the entire tax
code given the intricacies of policymaking. Therefore, the more
practical solution is to measure the assistance and to provide
certainty, benchmarking progress along the way. Utilities will then
measure up and meet the standards that are required of them.
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