PTC Extension: Another Squeaker for Clean Energy

By Scott Sklar, The Stella Group
January 3, 2013

Well, 'The Fiscal Cliff' theater was played out in Washington, and Congress included renewable energy in the final bill. According to the Renewable Fuels Association, the deal includes one-year tax-credit extensions for cellulosic biofuels, biodiesel, renewable diesel and algae-based fuel. The cellulosic bonus depreciation, which allows biofuel companies to expense up to half of their eligible capital costs in their first year, was also given a one-year extension. These advanced biofuels applications are critical for the U.S. to evolve its biofuels reliance onto non-foodstuff sustainable biomass – both wastes and non-arable land crops.

The American Wind Energy Association was also ecstatic — the fiscal cliff deal included a one-year extension of the wind energy production tax credit until January 1, 2014. The American Wind Energy Association said that the extension will save 37,000 jobs and revive business at 500 wind factories.

The solar industry also won a reprieve for their fight to preserve the 1603 credits in that taxpayers will actually be paid rather than recive a credit by the Treasury. The Treasury Department had previously announced that the mandatory, across-the-board spending cuts known as “sequestration” would mean that 1603 Grants issued by the Department would be cut by 7.6% beginning on January 3, 2013. However, this new legislation prevents the sequestration from taking effect until March 1st. SEIA continues to work with Treasury and the Office of Management and Budget to reduce any future reductions in 1603 payments if sequestration is triggered on March 1, 2013.

The one-year extension is not an attempt by Congress for energy equality in public policy, but rather a band-aid to stop the squealing for a little while. The energy efficiency and renewable industries have been plagued by on-again-off-again tax credits historically, while the fossil and nuclear industries keep $70 billion-per-year tax credits. In fact, when President Obama calls to remove the subsidies for conventional energy, the opposition calls it a “tax increase.” Hardly.

Congress will be addressing tax reform in terms of a broader deficit reduction effort. Preparing for this, former American Wind Energy Association chief executive Denise Bode wrote in a letter to eight leaders in both parties in Congress that the “extensive analytical effort” indicates that such a phase down could be a PTC starting at 2.2 cents per kWh, or 100% of the current level for projects that begin construction in 2013, followed by 90%, 80%, 70%, 60%, and then 50% of the current level for projects placed in service from 2014 through 2018.

You won’t see the coal, petroleum, or nuclear industries making a similar offer. The most glaring example comes from a Union of Concerned Scientists report “Nuclear Power: Still Not Viable Without Subsidies,” which found that more than 30 subsidies have supported every stage of the nuclear fuel cycle, from uranium mining to long-term waste storage. Added together, these subsidies often have exceeded the average market price of the power produced. So much for the government not picking “winners and losers.”

So in the spirit of 2013, "our glass is half full" for the wind and advanced biofuels — these industries and projects weren’t pushed over the cliff. But in reality, the "glass is half empty" because we do not have equitable public policy promoting the domestic near-zero-emissions, low-water, absolutely safe energy options. Expect more political theater in 2013. Don’t fall for any political benevolence, or continuance, of the double standard that has plagued the clean energy industries for many decades now.