Avoiding the cliff: Put energy policy to work for America

Around the turn of the century in the early 1900s, America was growing fast and energy was in high demand. Recognizing the need for action, Congress implemented policies to support the newly industrialized energy industry – primarily oil, gas and coal-fired technologies at that time. These subsidies performed as intended, boosting the energy industries of the day and helping to grow the broader economy. Seeing this success and determined not to “pick winners and losers,” Congress wound down energy subsidies for oil and gas, creating the level playing field for energy that we know today. 

Wait – hold up. That last part’s not quite right.

{mosads}Energy policy in the U.S. has a storied past, filled with many brilliant successes that can be directly linked to the emergence of America as a global superpower. But we cannot afford to sit on our heels. Today’s emerging energy paradigm is decidedly moving toward low carbon resources, yet our policy framework is overwhelming biased in favor of carbon-intensive energy. Until Congress again recognizes the need for political action, America’s energy policy is stuck in the past and it’s holding us back.

Today, the oil and gas sector can expense intangible drilling costs – a subsidy that was first implemented during the second year of World War I, in 1916.  Tax breaks for the coal industry began the same year Babe Ruth made his famous “called shot,” while playing for the New York Yankees in 1932. Those subsidies, known as the “percentage depletion allowance,” are still on the books today. And don’t forget nuclear, a technology that’s enjoyed continual government subsidies since 1947, worth up to 1.2 percent of the entire federal budget at times. 

And yet, as new and improved energy technologies have emerged – ultra low-cost and renewable wind and solar for example – Congress has failed to enact similar, long-lasting legislation to give these energy resources an opportunity to compete on a level playing field.

Serious federal support for renewable technologies wasn’t even enacted until 1992, and it took two more years for companies to actually start taking advantage of these policies. Even more troubling, Congress never made these policies permanent, opting instead for a cumbersome, periodic renewal process that hangs the private sector out to dry every few years.

This “policy uncertainty,” “market cliff,” or any of the phrases used to describe the blatantly unequal treatment for renewables by Congress was a major theme at ACORE’s annual industry convening in Washington D.C. this year. A report from the conference, titled Setting the Renewable Energy Policy Agenda, catalogued case studies from across the renewable energy industry and gave several recommendations to policymakers to help fix the “wild west” clean energy policy landscape.

Immediate renewal of expired and expiring tax credits should come first and foremost, the report concludes. Private sector businesses should not be forced to endure a de facto tax increase at a time when renewables are competing against long-supported and advantaged oil, gas and coal resources. Beyond renewal, Congress has an opportunity to meet the emergence of clean, inexpensive energy resources halfway by making supportive policies like the PTC and ITC permanent, while also extending traditional energy supports like Master Limited Partnerships to renewable energy as well. Furthermore, now that EPA’s Clean Power Plan is finalized, these tools are of even greater importance to states looking to meet compliance goals, reduce their carbon load and modernize their energy resources.

As the 114th Congress rolls out a number of energy related legislative items, from tax policy updates to Sen. Lisa Murkowski’s (R-Alaska) comprehensive energy bill, there is no better time to consider the past and – more importantly – the future of energy policy in America.

Only a revisionist’s reading of history could ever suggest that renewables deserve to be treated differently than oil, gas, coal, nuclear and other long-supported energy technologies at this critical time for America’s evolving energy industry. If Congress is serious about comprehensive tax reform, then the time will come for a serious consideration of all these policies. But until then, leaving renewables out in the dark is a foolish approach to both public energy policy and the encouragement of economic growth. 

Haley is communications director at the American Council On Renewable Energy (ACORE). He is also a fellow at the Clean Energy Leadership Institute.