As the year winds down, powerful conservative groups are working feverishly to kill a potential tax package with extensions of renewable energy incentives. But that doesn’t seem to worry some in the sector who remain optimistic that a favorable package will get through Congress in the lame-duck session.
“I keep my Pollyannaish hope alive,” said Kathy Weiss, vice president of government affairs at First Solar, one of the biggest solar companies in the United States.
Weiss said she’s confident that House Ways and Means Committee Chairman Dave Camp (R-Mich.) and other Republicans leading the negotiations, including Sen. Orrin Hatch (R-Utah), understand the economic implications of passing the clean energy provisions included in the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act.
Those who see the extenders as important to job growth “will find a way to get it done and appeal to the majority of their caucuses to find the votes,” said Weiss at an event yesterday hosted by the Pew Charitable Trusts.
The solar industry is advocating for Congress to adopt a “commence construction" modification that would allow projects to qualify for the 30 percent Investment Tax Credit, so long as they break ground before the policy expires at the close of 2016. Currently, projects only qualify for the credit if they start operating within this timeframe.
Wind has even more at stake with the Production Tax Credit, which is set to expire at the end of the year. U.S. wind installations fell by 90 percent when Congress let the incentive lapse last year, said Jim Reilly, senior vice president of federal legislative affairs for the American Wind Energy Association.
The combined-heat-and-power industry is also angling for support through the EXPIRE act, calling on Congress to increase the CHP tax credit from 10 percent to 30 percent, putting the technology on par with renewables. At this point, however, said Jennifer Derstine, director of policy at Capstone Turbine Corporation, “It’s still pretty up in the air.”
Several factors could potentially derail tax legislation on green technologies in the coming weeks.
1. Koch-linked conservative interest groups
Conservative organizations supported by the Koch brothers have made a strong push to cut tax breaks they’ve long opposed, such as the Production Tax Credit. According to Politico, the Koch-backed group Americans for Prosperity will spend $200,000 lobbying 25 House Republicans on the wind issue.
A broad business coalition, including clean energy advocates and trade groups such as the National Association of Manufacturers and the U.S. Chamber of Commerce, has been working hard to get lawmakers to pass the EXPIRE Act in its original form. More than 450 businesses and organizations signed a letter to Congress this week urging legislators to act before the end of the year.
According to Katherine Hamilton, partner at 38 North Solutions, Republicans are likely to pass the legislation as-is with time running short and a packed agenda lined up for next year
“Congress doesn’t have much time to fiddle with specific provisions,” she wrote in an e-mail. “Thus, I doubt any language in the extenders will be changed, just the dates.”
2. Republican-controlled Congress
The entire extenders package could get punted to January when Republicans take control of Senate. Once they have a majority in both houses, Republicans would have an even easier time stripping renewable energy tax credits from the extenders bill.
Some House Republicans have said they want to delay extending the tax provisions until the next session in hopes that a GOP-controlled Congress can make some of their desired changes permanent. But not all Republicans agree.
“This is probably not what Paul Ryan (R-Wisconsin) wants, given that he is looking at comprehensive tax reform. Getting the corporate tax rate down to 25 percent will take just about everything else as a pay-for, and he would not want to first have to pass an extenders bill,” said Hamilton.
With Senator Hatch and Senate Finance Committee Chairman Ron Wyden (D-OR) also contemplating broader tax reform, “My sense is both chambers want to start fresh in the 114th,” she said.
3) Immigration reform
Unilateral action on immigration from the White House could sour Republicans, putting them in no mood to tackle other issues.
Last night, President Obama announced a major executive action on immigration that received tremendous blow-back from Republicans. Passing EXPIRE will require will a fair amount of trading, and if the GOP goes into the negotiations unhappy, “it could be much tougher,” said Hamilton.
Reilly of the American Wind Energy Association was hopeful that the clash over immigration wouldn’t derail progress on the tax provisions. “Immigration could delay things slightly, but I don't think it will stop it,” he said.
What could save it?
One thing the cleantech industry has going for it is jobs, and it needs to stress that in order to keep its federal tax incentives, said retired five-term Republican Senator John Warner.
“If you can continue to show the certainty of jobs this tax structure will give, I think you’ll prevail and hold your position,” he said at the Pew event. “For how long, no one can guess.”
Another trend working in favor of cleantech is that the industry is growing in both blue and red states. North Carolina, Iowa, Georgia and others have seen their cleantech sectors boom since the last round of tax provisions was passed. Solar jobs in Georgia alone grew by 225 percent last year.
“This could blunt criticism from the Republican side that we’ve seen,” said Scott Thigpen, a senior associate at Booz Allen Hamilton working on energy issues, predominantly with the Department of Defense.
The DOD doesn’t have a political stake in the EXPIRE act, but it is affected by the outcome, Thigpen added. Phasing out renewable energy tax credits over five or six years would give the DOD time to better plan and execute its projects. As it stands, each branch of the military is rushing to complete projects before tax credits expire. The Navy, for instance, is trying to get a gigawatt worth of projects under acquisition in the space of just a year and a half.
“My fear is that mistakes will get made because of the rush to get projects out the door,” he said.
Letting tax incentives expire without a calculated transition could cause companies to pull projects forward that could have been built in 2017 and 2018, creating a boom-and-bust cycle. General Electric, one of the biggest players in the wind sector, has called for Congress to approve a smooth phase-out of the tax credits. Others have made the same appeal.
“Whatever they do, I really hope there’s an effort not to shock the market,” said Weiss.For more context on what the recent elections mean for the clean energy industry, listen to the Energy Gang podcast below: