Industry groups and experts see Democrats’ proposed clean energy tax credits as a major boost for expanding alternative energy deployment and tackling climate change, underscoring the high stakes as the party seeks to advance the measures.
Modeling has shown that the effects of the credits included in the Build Back Better package could as much as double the current record rate of renewable deployment and cut significant emissions from the U.S. electric sector.
The legislation, the core of President Biden’s domestic agenda, contains a number of tax credits expected to benefit energy sources including solar, wind and nuclear and bolster technologies like storage, transmission and carbon capture.
Under the bill, renewables like wind and solar would be able to use either a tax credit that gives them money based on how much power they produce or a tax credit that allows companies to deduct as much as 30 percent of their investment.
Both the production tax credit (PTC) and the investment tax credit (ITC) would last through 2031. These credits are currently already in existence, but the legislation would extend them and bring the ITC up from its current 26 percent cap.
Under the legislation, people using these credits would also be able to receive tax benefits as a direct payment — instead of through more complicated mechanisms.
Suzanne Leta, head of policy and strategy at the solar energy firm SunPower, said the expansion of the solar investment tax credit was among the legislation’s “most impactful” climate provisions.
Currently, she noted, the tax credit is only available for deployed solar energy, but provisions in the reconciliation package would expand it to microgrids and standalone battery storage.
The bill faces an uncertain future in the Senate, where the party cannot afford any defections. While the clean energy tax credits have not been considered to be among the most contentious provisions, Sen. Joe Manchin (D-W.Va.) has expressed opposition to several other components including on climate.
Advocates and modelers say that the tax credits overall would be a boon for clean energy — and help it outcompete fossil fuels.
“All that additional wind and solar is now not just getting built to meet the next set of electric demand as demand grows, but is also starting to eat into existing fossil generation,” said John Larsen, a director at research organization Rhodium Group.
“Wind and solar, especially with the tax credits, are now the cheapest electrons available,” he said.
Modeling by Rhodium Group has shown that the tax credits could result in the annual deployment of between 31 gigawatts and 65 gigawatts of new renewables on average over the next several years — enough to power up to 12 million average U.S. homes. By comparison, deployment hit a record 30 gigawatts in 2020.
In addition to tax credits for renewables, the package also has a new tax credit for nuclear power plants based on how much electricity they produce and sell. It also has a credit for fossil fuel facilities that use technology to capture their emissions, though this provision is controversial among environmentalists who argue it could extend the life of coal plants as they weigh whether pursuing this type of technology is feasible.
Renewable energy leaders told The Hill that they see the credits as key for expanding their industry.
Gregory Wetstone, president and CEO of the American Council on Renewable Energy, touted the credits as giving investors, developers and manufacturers “the certainty that businesses want” since they last for several years.
But, he said, the package isn’t perfect. In particular, Wetstone lamented changes to corporate tax laws that get rid of an accelerated write-off benefit, saying this means companies will need to raise more capital upfront to build renewable energy projects.
Asked about write-offs on Tuesday, Senate Finance Committee Chairman Ron Wyden (D-Ore.) told reporters, “We believe renewable energy is fully protected under the language.”
The House recently passed the legislation in a mostly party-line vote, with just one Democratic defector. But the bill faces a tougher path in the Senate, where Manchin and others have demanded changes on a host of issues.
Manchin hinted as recently as Tuesday that additional energy provisions could change following a meeting with Senate Majority Leader Charles Schumer (D-N.Y.).
The West Virginia senator has raised objections to a program that would penalize drillers for methane emissions and another seeking to incentivize consumers to buy union-built electric vehicles. Still, the clean energy tax credits could also be a casualty if negotiations fall through.
Amid uncertainty about the fate of the package, Leta was sanguine about the likelihood the renewable tax credits will make it into the final version.
“While the bill has been viewed as partisan in nature, clean energy tax credits are actually … broadly supported on both sides of the aisle and by American consumers,” she told The Hill last week.
“And they are incredibly consumer friendly, which I think further solidifies their support in Congress.”
Erin Duncan, vice president of congressional affairs at the solar energy trade group SEIA, also said the renewable energy provisions should be uncontroversial.
“There are wind, solar and storage jobs in every state and in red and blue congressional districts,” she said.
— Naomi Jagoda contributed to this report.