KC Business Journal Guest Column: The New Reality for Renewable Energy

KC Business Journal Guest Column: The New Reality for Renewable Energy

There have been numerous articles recently regarding wind and solar energy being priced competitively or cheaper than natural gas or coal.  Pundits are quick to point out that renewables receive substantial subsidies to make them competitive.  Fossil fuel interests in Congress have perpetually pushed for ending the Production Tax Credit (PTC) and Investment Tax Credit (ITC) under the guise of its “market distortion,” while conveniently omitting the many permanent tax incentives which their industry receives.  While renewable energy has only recently been getting more subsidies, it has also created an industry employing a million people with a competitive and beneficial product.

A few facts to consider:

  • There are currently 12 tax subsidies in the U.S. tax code that subsidize fossil fuel extraction, which cost more than $4 billion dollars per year. Renewables used to get $7.3B, prior to 2013 expiration of wind and biomass PTC & ITC.
  • The fossil fuel industry has received $446 billion dollars in subsidies in the last century, which has paid for many generating assets on their books today.
  • There are only 4 permanent energy tax credits in the U.S. tax code, 3 are for fossil fuels and 1 is for nuclear.  Renewables have zero ability to plan long-term.

The last point has been particularly devastating to renewable industry growth.  Originally enacted as part of the Energy Policy Act of 1992, Congress has extended the PTC provision five times and has allowed the renewable energy tax credit to expire on five occasions. But the boom bust cycle of the PTC availability has caused significant drops in new installations and the closure of existing manufacturing facilities.

The fossil fuel industry likes to say they don’t receive “subsidies” but instead are allowed “cost recovery” through tax deductions, such as a 100% write off of intangible costs and the Section 199 manufacturing deduction, which allows for a deduction of their net profits from manufacturing.

The renewable energy industry doesn’t need preferential treatment above other energy sources like oil, gas, and nuclear.  But it is important that Congress deliver a stable and equal playing field in federal tax matters, similar to credits, which other energy sources enjoy and have enjoyed for decades in the past.

America needs and Americans want a secure and diverse supply of homegrown energy resources to power the nation.  Our energy policies should reflect that. Now is the time to urge Congress to renew the PTC and ITC for wind and biomass so that they are not operating at a disadvantage to fossil fuels. In the long-term, all energy sources should have the same permanent tax benefits, without an advantage to those with the largest lobbying budget.

By Bill Love, CEO of Biostar Renewables


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