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Analysis: Sens. extend renewable tax break

The Senate extended tax credits for renewable energy Thursday, prolonging the economic incentives the renewable industry receives.

The legislation mirrors a bill introduced last week by Sens. John Ensign, R-Nev., and Maria Cantwell, D-Wash., who pushed the action through the Senate as an amendment to the Housing Stimulus Bill. The amendment sailed through with a 88-8 vote, and the Housing bill passed 84-12.

The Production Tax Credit gives facilities 2 cents for every kilowatt-hour of electricity produced from renewable sources, including wind, biomass, geothermal and hydropower.

If passed into law, the PTC extension will further U.S. energy independence by increasing production of homegrown energy, Ensign said in a statement.

“Today, we’re hostage to skyrocketing foreign energy prices,” Ensign said. “Passage of our amendment today moves us one step closer to meeting the serious challenges we face in ensuring that America can reduce its dangerous reliance on foreign sources of energy.”

The PTC extension has also garnered praise for its potential to increase carbon-neutral energy sources, decreasing the nation’s CO2 emissions.

Congress first passed a PTC for renewables as part of the Energy Policy Act of 1992. Since then, however, the PTC has expired three times, and been unavailable to the industry for as much as eight months at a time. Yesterday’s passage represents the sixth extension for the credits, according to the Union of Concerned Scientists, a nonprofit research organization.

The stop-start nature of the tax credit has made it difficult for the industry to secure investments or commit to large-scale projects, according to industry representatives.

The one-year extension of the credits, although a step in the right direction, doesn’t give the industry the kind of stability it needs, said Steve Greenwald, an attorney who represents renewable energy businesses and producers.

“We can’t get hung up on short-term political debates,” said Greenwald, partner at Davis Wright Tremaine, a national law firm. “We need a long-term policy.”

Without the PTC, Greenwald told United Press International, the renewable industry would not have reached the stage it is at today, and, without its continuation, growth will decline.

“It’s insanity for this country to think we’re moving toward renewable power if we remove the mechanism that has enabled us to make the advances we have,” he said. “If (the PTC) makes sense for the first kwh that comes online, surely it makes sense for every kilowatt after that, until we reach” maximum capacity.

Some of the senators who voted against the measure did so, at least in part, precisely because of the amendment’s limited life. Sen. Lamar Alexander, R-Tenn., who proposed the PTC be extended for two years, falls into this category.

Alexander also pushed for a reduction in the amount of the tax credit going toward wind, the major beneficiary of the PTC. His proposal would have decreased the PTC for wind by half, to one cent per kwh.

If the PTC is continually extended for only short time periods, Alexander said, wind will be the only industry to benefit, because it can get online quicker than others.

“(Extending it to two years) would mean that wind would not get all the money but that some others would have more time to respond to the incentives we are creating with these tax credits,” he said on the Senate floor Thursday.

But if the PTC isn’t extended at all, it could mean renewable energy jobs and manufacturing will leave the United States, said Tory Mazzola, Ensign’s communications director.

“(The industry) is already talking about moving these jobs overseas, particularly the solar industry,” Mazzola told UPI. “These incentives need to be extended as soon as possible to provide the renewable energy industry the stability it needs to grow.”

Before the Senate’s provision can become law, however, the House must also pass the measure – something which could prove tricky if the issue of the budget is raised.

Currently, the amendment does not specify how the PTC, and other incentives included in the legislation, will be paid for, said Ciaran Clayton, spokesman for Sen. Cantwell, co-sponsor of the PTC amendment. The Joint Economic Committee estimates the entire amendment will come at a price tag of close to $6.6 billion.

“The hope right now is just to get it passed in the next one to two months,” Clayton told UPI. “(But) if the House feels they need to find a way to pay for this, it could be difficult.”

In fact, unless House leadership decides to bypass the PAYGO provisions reinstated by the democrats at the beginning of 2007, representatives will be forced to decide where the money’s coming from before they pass the measure

The amendment already lost some votes in the Senate over the issue, including those of some renewable-energy supporters like Sen. Robert Byrd, D-W.Va.

“(Byrd) is a big proponent of PAYGO,” said Bette Phelan, communications director for Byrd. “He does support energy tax cuts, but he believes they need to be paid for.”

The Ensign-Cantwell amendment also provides incentives for taxpayers who purchase property that uses solar power and contractors who build energy efficient homes or office buildings, among other things.

By Rosalie Westenskow
UPI Correspondent

United Press International

11 April 2008