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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Renewable and alternative energy developers, and the companies that supply equipment and services to those developers, cheered last Friday's adoption of a federal budget that extended tax credits for renewable and alternative energy. Those extensions were contained in the $1.1 trillion omnibus government spending bill that passed the House of Representatives by a 316-113 margin, and the Senate by a 65-33 margin. President Barack Obama signed the bill into law Friday.
Like many bills that make it through a sharply divided Congress, this one involved extensive horse-trading between Democrats and Republicans to make it palatable to both sides. Controversial "poison pill" riders and amendments were kept off the bill, which caused many Democrats to support it but several dozen Republicans to oppose it. Democrats wanted to extend the renewable and alternative energy credits, but Republicans were less enthusiastic about that. However, ending the crude-oil export ban, a move strongly favored by Republicans, convinced large majorities of each party to support the final bill.
Trade groups representing the renewable and alternative energy industries praised Congress' willingness to extend federal tax credits, which provide greater certainty to developers and suppliers of equipment and services. The measure passed by Congress and signed by the president also would extend the federal $1 per gallon biodiesel tax credit.
"We're going to keep this American wind power success story going," Tom Kiernan, chief executive of the American Wind Energy Association (AWEA) (Washington, D.C.), said in a statement. "With predictable policies now in place, we will continue advancing wind turbine technology, driving down our costs and passing the savings on to American families and businesses in all corners of the country. We look forward to building a future with more affordable, reliable, clean wind energy."
Kiernan said the Production Tax Credit (PTC) has helped more than quadruple wind power in the U.S. since 2008--up from 16,702 megawatts (MW) installed at the start of 2008 to 69,470 MW installed through the third quarter of 2015. Federal tax credits have helped drive down the cost of wind energy by 66% in six years, he added. Kiernan didn't estimate the PTC extension's impact on future projects or employment, but he did cite the recent "Wind Vision" report from the U.S. Department of Energy (DoE) (Washington, D.C.), which estimated the wind energy industry's current employment of 73,000 could swell to 380,000 jobs by 2030. That DoE report also said the U.S. was on track to having 20% of its electricity come from windpower by 2030.
According to an analysis of the bill by the Stoel Rives law firm, the PTC will be extended for five years, for projects that begin construction by 2020. The tax credit will continue to be set at 2.3 cents per kilowatt-hour of electricity produced. Many previous versions of the PTC has similar "begin construction by" deadlines, though the most recent PTC extension was available to developers that incurred 5% of the capital costs of their projects by yearend 2014.
In extending the PTC last Friday, Congress also included incentives to spur near-term project construction. For example, for projects beginning construction in 2017, the tax credit is reduced by 20%. Projects beginning construction in 2018 will absorb a 40% reduction of the tax credits. And projects that kick off construction in 2019 will face a 60% reduction in the value of the PTC.
Stoel Rives added that other forms of renewable electric generation--geothermal, landfill gas, trash, marine, and hydrokinetic facilities as well as certain closed-loop biomass, open-loop biomass and qualified hydropower facilities--would be eligible to claim the PTC if construction begins before January 1, 2017 with no phase-out.
Rhone Resch, president and chief executive of the Solar Energy Industries Association (SEIA) (Washington, D.C.), praised Congress for extending the Investment Tax Credit (ITC) for solar power for five years, to 2020. "By extending the solar investment tax credit for five years with a commence construction provision and a gradual ramp down, bipartisan members in both Houses have reestablished America as the global leader in clean energy, which will boost our economy and create thousands of jobs across America," he said in a statement.
Resch estimated the solar industry employed 200,000 people, and the ITC extension would lead to the creation of at least 140,000 more jobs. The extension also would lead to more than $125 billion in new, private sector investment in the U.S. economy.
The solar industry's Investment Tax Credit (ITC) also is extended for five years, through 2020, Stoel Rives noted. The ITC, like the PTC, now is tied to the start of construction, rather than an in-service date. Solar projects that begin construction before 2020 will qualify for a full 30% credit. But if construction begins in 2020, the project would qualify for a 26% credit. Projects that begin construction in 2021 would receive a 22% credit. Projects that kick-off construction after 2021 but that are operating before 2024 would be eligible for a 10% credit, the law firm said.
Developers are planning on beginning construction of a large number of utility-scale wind and solar projects over the next five years. The tax credit extensions could help the economic viability of planned projects. Industrial Info is tracking 395 active utility-scale (greater than one megawatt of generating capacity) wind projects that are scheduled to kick off between 2015 and 2020. The total investment value (TIV) of those projects is about $135.6 billion. Solar developers, meanwhile, have scheduled construction to start on 184 active projects between 2015 and 2020, valued at about $37.6 billion.
Click on the icon at right to see a bar chart of the value of scheduled wind and solar project kickoffs, by year, from 2015 through 2020.
The availability of tax credits through 2020 could also help restart renewable energy projects that have been placed on hold or cancelled. Industrial Info is tracking 173 windpower projects that were scheduled to begin construction between 2014 and 2016, with an aggregate value of approximately $56.2 billion. On the solar side, Industrial Info is tracking 64 projects valued at $16.6 billion that were scheduled to begin construction between 2014 and 2016, but have been placed on hold.
Click on the icon at right to see a bar chart of the value of wind and solar projects that were scheduled to begin construction between 2014 and 2016, but have been placed on hold.
It also is possible that the PTC and ITC extensions could breathe life into wind and solar projects that have been cancelled. Industrial Info is tracking 173 windpower projects valued at $78.8 billion that have been cancelled. Those projects were scheduled to begin turning dirt between 2014 and 2016. Industrial Info is also tracking 45 projects that have been cancelled by solar developers. The value of those cancelled solar projects is about $17.9 billion.
Click on the icon at right to see a bar chart of the value of wind and solar projects that were scheduled to begin construction between 2014 and 2016, but have been cancelled.
"Renewable energy firms got an early Christmas present from the U.S. Congress, and we expect that will spur greater project activity in the next few years," remarked Britt Burt, vice president of global research for the Power Industry. "President Barak Obama's Clean Power Plan, now being litigated in the federal courts, is expected to lead to a surge in project activity for renewable energy developers. Extending these tax credits will increase the economic viability of a number of projects. However, as utilities come closer to achieving the renewable electricity mandates their states have enacted, there may be less demand for new renewable power projects. As in many areas of life, we expect the early bird will get the worm."
Jay Brunson, who leads Industrial Info's research on Alternative Fuels, added, "The $1 per gallon credit for biodiesel will help rejuvenate an industry that has been shrinking since the prior tax credit expired in 2013. We have seen dozens of projects worth billions of dollars stalled or cancelled, and we hope the extension will cause developers to reconsider those projects."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/
Like many bills that make it through a sharply divided Congress, this one involved extensive horse-trading between Democrats and Republicans to make it palatable to both sides. Controversial "poison pill" riders and amendments were kept off the bill, which caused many Democrats to support it but several dozen Republicans to oppose it. Democrats wanted to extend the renewable and alternative energy credits, but Republicans were less enthusiastic about that. However, ending the crude-oil export ban, a move strongly favored by Republicans, convinced large majorities of each party to support the final bill.
Trade groups representing the renewable and alternative energy industries praised Congress' willingness to extend federal tax credits, which provide greater certainty to developers and suppliers of equipment and services. The measure passed by Congress and signed by the president also would extend the federal $1 per gallon biodiesel tax credit.
"We're going to keep this American wind power success story going," Tom Kiernan, chief executive of the American Wind Energy Association (AWEA) (Washington, D.C.), said in a statement. "With predictable policies now in place, we will continue advancing wind turbine technology, driving down our costs and passing the savings on to American families and businesses in all corners of the country. We look forward to building a future with more affordable, reliable, clean wind energy."
Kiernan said the Production Tax Credit (PTC) has helped more than quadruple wind power in the U.S. since 2008--up from 16,702 megawatts (MW) installed at the start of 2008 to 69,470 MW installed through the third quarter of 2015. Federal tax credits have helped drive down the cost of wind energy by 66% in six years, he added. Kiernan didn't estimate the PTC extension's impact on future projects or employment, but he did cite the recent "Wind Vision" report from the U.S. Department of Energy (DoE) (Washington, D.C.), which estimated the wind energy industry's current employment of 73,000 could swell to 380,000 jobs by 2030. That DoE report also said the U.S. was on track to having 20% of its electricity come from windpower by 2030.
According to an analysis of the bill by the Stoel Rives law firm, the PTC will be extended for five years, for projects that begin construction by 2020. The tax credit will continue to be set at 2.3 cents per kilowatt-hour of electricity produced. Many previous versions of the PTC has similar "begin construction by" deadlines, though the most recent PTC extension was available to developers that incurred 5% of the capital costs of their projects by yearend 2014.
In extending the PTC last Friday, Congress also included incentives to spur near-term project construction. For example, for projects beginning construction in 2017, the tax credit is reduced by 20%. Projects beginning construction in 2018 will absorb a 40% reduction of the tax credits. And projects that kick off construction in 2019 will face a 60% reduction in the value of the PTC.
Stoel Rives added that other forms of renewable electric generation--geothermal, landfill gas, trash, marine, and hydrokinetic facilities as well as certain closed-loop biomass, open-loop biomass and qualified hydropower facilities--would be eligible to claim the PTC if construction begins before January 1, 2017 with no phase-out.
Rhone Resch, president and chief executive of the Solar Energy Industries Association (SEIA) (Washington, D.C.), praised Congress for extending the Investment Tax Credit (ITC) for solar power for five years, to 2020. "By extending the solar investment tax credit for five years with a commence construction provision and a gradual ramp down, bipartisan members in both Houses have reestablished America as the global leader in clean energy, which will boost our economy and create thousands of jobs across America," he said in a statement.
Resch estimated the solar industry employed 200,000 people, and the ITC extension would lead to the creation of at least 140,000 more jobs. The extension also would lead to more than $125 billion in new, private sector investment in the U.S. economy.
The solar industry's Investment Tax Credit (ITC) also is extended for five years, through 2020, Stoel Rives noted. The ITC, like the PTC, now is tied to the start of construction, rather than an in-service date. Solar projects that begin construction before 2020 will qualify for a full 30% credit. But if construction begins in 2020, the project would qualify for a 26% credit. Projects that begin construction in 2021 would receive a 22% credit. Projects that kick-off construction after 2021 but that are operating before 2024 would be eligible for a 10% credit, the law firm said.
Developers are planning on beginning construction of a large number of utility-scale wind and solar projects over the next five years. The tax credit extensions could help the economic viability of planned projects. Industrial Info is tracking 395 active utility-scale (greater than one megawatt of generating capacity) wind projects that are scheduled to kick off between 2015 and 2020. The total investment value (TIV) of those projects is about $135.6 billion. Solar developers, meanwhile, have scheduled construction to start on 184 active projects between 2015 and 2020, valued at about $37.6 billion.
Click on the icon at right to see a bar chart of the value of scheduled wind and solar project kickoffs, by year, from 2015 through 2020.The availability of tax credits through 2020 could also help restart renewable energy projects that have been placed on hold or cancelled. Industrial Info is tracking 173 windpower projects that were scheduled to begin construction between 2014 and 2016, with an aggregate value of approximately $56.2 billion. On the solar side, Industrial Info is tracking 64 projects valued at $16.6 billion that were scheduled to begin construction between 2014 and 2016, but have been placed on hold.
Click on the icon at right to see a bar chart of the value of wind and solar projects that were scheduled to begin construction between 2014 and 2016, but have been placed on hold.It also is possible that the PTC and ITC extensions could breathe life into wind and solar projects that have been cancelled. Industrial Info is tracking 173 windpower projects valued at $78.8 billion that have been cancelled. Those projects were scheduled to begin turning dirt between 2014 and 2016. Industrial Info is also tracking 45 projects that have been cancelled by solar developers. The value of those cancelled solar projects is about $17.9 billion.
Click on the icon at right to see a bar chart of the value of wind and solar projects that were scheduled to begin construction between 2014 and 2016, but have been cancelled."Renewable energy firms got an early Christmas present from the U.S. Congress, and we expect that will spur greater project activity in the next few years," remarked Britt Burt, vice president of global research for the Power Industry. "President Barak Obama's Clean Power Plan, now being litigated in the federal courts, is expected to lead to a surge in project activity for renewable energy developers. Extending these tax credits will increase the economic viability of a number of projects. However, as utilities come closer to achieving the renewable electricity mandates their states have enacted, there may be less demand for new renewable power projects. As in many areas of life, we expect the early bird will get the worm."
Jay Brunson, who leads Industrial Info's research on Alternative Fuels, added, "The $1 per gallon credit for biodiesel will help rejuvenate an industry that has been shrinking since the prior tax credit expired in 2013. We have seen dozens of projects worth billions of dollars stalled or cancelled, and we hope the extension will cause developers to reconsider those projects."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/
