Democratic party leaders in the U.S. Congress Tuesday vowed to revisit a renewable energy mandate and tax breaks in the new year.
After heavy lobbying by the oil industry and the White House, Senate Republicans were able to last week block inclusion of a renewable energy standard and tax breaks meant to encourage renewable energy projects such as wind turbine and solar cell farms.
“We will go back to the (renewable mandate) and try to get that legislation in the next year,” said House Speaker Nancy Pelosi, D-Calif., at the signing of the energy bill. “Of course, we need to have the tax credits for the private sector too,” she said.
Senate Majority leader Harry Reid, D-Nev., said the Congress would vote again on the tax proposal “more quickly than you think.”
“We are going to keep fighting for these and other forward-looking reforms,” Reid said.
Two major tax provisions – a renewable energy production credit and an investment credit – would have been in part funded by cutting around $13 billion in tax breaks to the five biggest oil companies, including ExxonMobil (XOM), Chevron Corp. (CVX), and ConocoPhillips (COP).
Senator Jeff Bingaman, D-N.M., Chairman of the Senate Energy and Natural Resources Committee, said it had become a matter of urgency for many firms in the sector.
“We’re already seeing seeing people decide not to proceed with projects because under the statute, you have to have them in service by the end of next year or you’re not eligible for the tax credit,” Bingaman told Dow Jones Newswires.
Solar companies such as Evergreen Solar (ESLR) and Emcore Corp. (EMKR), and European wind turbine manufacturer’s Vestas Wind Systems (VWS.KO) and Gamesa Corporacion Tecnologica (GAM.MC) count on the credits in the U.S. to help offset the costs for the expensive electricity generation projects.
In the House, Chairman of the Energy and Commerce Committee, John Dingell, D- Mich., said the approved energy bill, which increases fuel efficiency standards 40% by 2020 and boosts biofuel production to 26 billion gallons by 2022, was “by no means the last thing that we will do.”
“We will establish a new low carbon fuel standard, we will address the problem of creating a workable renewable energy requirement for our electrical utilities … and we will start on them as soon as the Congress comes back,” Dingell said.
It’s unclear how Democrats plan to move both the proposals through Congress after successful Republican blocking, and Bingaman said he hadn’t yet formed a strategy.
Southern Co. (SO) and American Electric Power Co. (AEP) – both of which have power plants in the U.S. Southeast – lobbied hard against the renewable electricity standard.
These companies didn’t want to make the costly investments in states that naturally lack significant solar or wind generation capacity.
The Senate has passed in previous Congresses a renewable standard twice before, but the legislation then failed in the House. This time, though the renewable mandate was approved in the House, it failed in the Senate chamber.
Bingaman earlier this year indicated that modifications might be made to make it more palatable to Republicans.
Ranking member of the Senate Energy and Natural Resources Committee Pete Domenici, R-N.M., has tried to include nuclear power and increase credit allowed for energy efficiency gains, while other lawmakers would prefer broader inclusion of other types of renewable energy sources.
The tax provision, which passed the House overwhelmingly, failed to overcome the GOP block in the Senate by one vote.
The lone Democrat to vote against approving the tax bill’s inclusion into the energy bill, Mary Landrieu, D-La., is facing a tough re-election battle in her oil-funded home state. Senate Democrats may seek to flip the votes of Max Crapo, R-Idaho, who voted for an earlier, similar tax provision, but ultimately voted against inclusion of the final tax proposal, and John Thune, R-S.D., Democrat aides said.
U.S. President George W. Bush has also threatened to veto any legislation that hiked taxes for the oil industry, though he has remained silent on increased taxes for the renewable industry. If there was another way to fund the credits, the White House may approve the legislation, Capital Hill staffers said.
Walter Nasdeo, managing director of research at Ardour Capital, and a creator of the Market Vector’s Global Alternative Energy energy fund, said even if the tax package does’t resurface, he believes the production and investment credits will.
“There’s too much political capital invested into alternatives for the credits to be shut down,” Nasdeo said.
“Hopefully in ’08 sometime we’ll have the extension so that it is seemlessly covered,” he said. The renewable production tax credit expired for half a year in 2005, stalling many wind projects, but after renewal, development rebounded.
Tom Amis, head of law-firm Alston & Bird’s renewable energy group, which finances the sector, also sees the credits revived, tied into other related bills that will come to the floor in 2008. “As long as it doesn’t go too late in the year, I don’t think you’ll see too much of a let-up in development,” he said.
Amis believes the renewable mandate may take a little longer, however: “Most people realize that this is an epic debate that’s going to go on for several years; the administration will be changing, Congress will be changing and these issues won’t be going away.”
More than half the states in the U.S. already have renewable energy mandates, but once a national standard is set, “then that would potentially cause a paradigm shift for the market in terms of a whole new set of players coming into the business,” Amis said.
“As it is now, already high rates of growth will continue, but it will take a little longer before a true paradigm shift is in place,” he added.
-By Ian Talley, Dow Jones Newswires
18 December 2007
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