Bipartisan Support Grows for Renewable Energy Incentive Extension

Published by Michael Novogradac on Monday, December 5, 2011 - 12:00am

In today’s issue of The Daily Iowan, Senator Chuck Grassley discusses the outlook for wind energy, including a call for the renewable energy production tax credit to be extended.  Specifically, he writes:

“… the tax credit should be extended long enough to give investors certainty in order to maximize the opportunities … Developers depend on the production tax-credit to improve a renewable energy facility’s cost-effectiveness by freeing up money for investment.”

Sen. Grassley’s support for the production tax credit is not surprising, as Iowa is second in the nation, behind only Texas, in installed wind-energy capacity. Iowa currently generates 20 percent of its electricity needs from wind.

Sen. Grassley is not alone in supporting an extension of the PTC; in fact, a bipartisan House bill that would extend the production tax credit (PTC) for four years through 2016 currently has 28 cosponsors. One of those 28, Congressman Bruce Braley, last week urged House leaders to include legislation extending the energy production tax credit for another four years in any year-end tax extender bill. In a letter to House leadership, Congressman Braley warns that when the production tax credit has been allowed to expire, investment in wind energy projects has declined dramatically. Because wind project developers are hesitant to schedule future projects without the certainty of having the tax credit in place, an extension is necessary to maintain investor confidence.

Also last week, a coalition lead by the Solar Energy Industries Association sent a letter to Congress calling for a one-year extension of the Section 1603 cash grant exchange program. The cash grant program expires on December 31, 2011. The coalition is comprised of more than 750 companies, small businesses and organizations. In its letter, the group says the tax equity market modestly improved in 2010, however, the letter warns that the market has not recovered to pre-recession activity while demand from clean energy projects has grown dramatically. The letter cites a July 2011 survey of tax equity investors conducted by the U.S. Partnership for Renewable Energy Finance that estimates expiration of the cash grant would shrink the total financing available for energy projects by 52 percent in 2012. The current level of the Section 1603 program activity is about $5 billion a year. If the grant is allowed to expire, a multi-billion dollar increase in renewable energy tax credits could hit the market in 2012.

What This Means for the Tax Credit Equity Market 

The expiration of the Section 1603 cash grant program this year and the pending expiration of the production tax credit next year are the two largest uncertainties in the 2012 renewable energy tax credit equity market. I discuss these issues and what they could mean for renewable energy tax credit investment in 2012 in my Washington Wire column, “What’s in Store for the Tax Credit Equity Markets in 2012” in this month’s issue of the Novogradac Journal of Tax Credits.

Your Predictions? 

What do you think the chances are of an extension for Section 1603? Will the PTC be extended before it expires? Share your thoughts on what lies ahead for the renewable energy community in the comments section below.