June 18, 2008
San Francisco Takes 1 Step Forward, Congress Risks 2 Steps Back
If Congress doesn't act soon, many federal credits that have fueled the rapid growth of wind and solar energy in recent years will expire at the end of this year. Here are some of the key programs that would be affected:
Solar investment tax credit: The government now pays 30 percent of the cost to businesses to invest in solar power to meet their energy needs. Cost to extend for 10 years: $1.7 billion.
Residential energy-efficient property tax credit: Residential users also get a 30 percent tax credit for installing solar panels, geothermal heat pumps or small wind equipment. The tax credit, however, has a limit of $2,000, which lawmakers are trying to raise. Cost to extend for 10 years: $907 million.
Renewable energy production tax credit: This program gives wind, solar, geothermal and other renewable power sources a leg up with a 1.9-cent per kilowatt-hour credit, which makes them more competitive with natural gas or coal-fired power plants. Congress has let the tax credit lapse before, and each time investment in wind and other renewable energy projects dropped. Cost to extend for one year: $7 billion.
And while a lapse in federal solar tax credits would impact the end consumer, it would have an even greater impact on the industry and its investors.
First Published: June 18, 2008 7:30 AM
Comments from "Plugged In" Readers
It costs $1.7 billion to extend the solar program 10 years to reduce our dependency on fossil fuels ? What a farce ! Clearly that $1.7B is better spent on another week of the Iraq war.
Posted by: The Milkshake of Despair at June 18, 2008 8:35 AM
Thank goodness we will soon be lifting the ban on spilling, I mean drilling, oil off the US coasts. Then we won't need all this annoying "alternative" energy.
I prefer my energy the way I prefer my men, straight (straight off craigslist!!! bah da dum!).
Posted by: badlydrawnbear at June 18, 2008 8:44 AM
If the value is there, then it should be possible to make this transition without subsidies. Maybe smoothing regulation and starting to think about inevitable future disposal and recycling of these products would be a better use of taxpayer money?
Posted by: Mole Man at June 18, 2008 9:00 AM
The value is there, but many technologies that are cost-effective now would not exist without substantial government investment (e.g. nuclear power, or the internet). No single company would (or could) invest the amount needed, and be able or willing to fund the wide variety of scientists and entrepreneurs needed to get FUDAMENTALLY new technology off the ground and into the mass market.
Why not save the country a ton of money and eliminate all government subsidies and (while we're at it) regulations promoting (or mandating) any kind of environmentally beneficial technologies? Why bother with catalytic converters in cars, clean diesels or emissions standards for power plants when it's cheaper to just "let the free market decide."
Because if you do that, then you get China. Pollution and irreversible environmental destruction on an epic scale.
So anyway, the subsidies will continue until operating margins improve!
Posted by: Jimmy (Bitter Renter) at June 18, 2008 9:45 AM
To Mole Man,
One of the big stalemates for the renewal of these tax credits was the fight between democrats and republicans in identifying where the money would come from. Democrats wanted to take away some (not all, just some) of the tax breaks big oil companies get (yes they get billions each year, as does coal). Of course republicans wanted to protect their rich brethren and couldn't justify giving renewable energy money from companies already making billions in profit.
Having said that, you are right, eventually renewable energy will become cost effective without subsidies. It's only a matter of time now, and subsidies will help speed that along by providing incentives now, when its not cost effective. But what would happen to big oil companies if renewable energy companies suddenly became more cost effective than oil? What do you think republicans that have strong ties to oil companies think about that?
Posted by: Scott at June 18, 2008 9:52 AM