Bailing Out Renewable Energy Tax Credits

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In case you missed the news, the $700B bailout included tax credits for renewable energy industries. So what are the greenest bits of the bill and what does it mean for renewable energy companies? Also, where is all that glorious cash coming from?

Renewable Energy Tax Credits:

• Solar energy gets an 8-year extension on existing 30% tax credits for residential and commercial solar installations.

• Solar installations for residents and utilities are no longer confined to the US$2,000 monetary cap. Chip in a few dollars a month to help support independent cleantech coverage that helps to accelerate the cleantech revolution!

• 1-year extension on the Renewable Energy Production Tax Credit benefits:
  • Wind
  • Solar
  • Geothermal
  • Closed-loop biomass
  • Hydropower
  • Landfill Gas Capture
  • Trash Combustion Facilities

Partly paid for by a change in the tax code for the oil and gas industry.

• Wind energy also benefits from the 8-year extension on existing renewable energy investment tax credit.

• Fuel cells get a tax credit limitations increase from $500 to $1,500 per half-kilowatt of capacity.

• Biodiesel gets a 1-year, $1 per gallon production tax credit.

• The biofuel “splash and dash” loophole has been closed. Companies can no longer cross the Atlantic to mix foreign biofuels with U.S. biodiesel for a tasty subsidy, only to ship it back to European markets.

• Coal gets 10 years of tax credits for “projects with the greatest separation and sequestration percentage of total carbon dioxide emissions”. Total Cost: US$1.4 billion.

• Creates Clean Energy Bonds for renewable energy facilities. Total Cost: $800 million

• Creates a new tax credit for plug-in electric vehicles. How much can you get? $2,500 – $7,500  |  Total Cost: $758 million.

• Creates a tax credit for Marine Renewable Energy.

So What?

So one the the problems that renewable energy technologies have faced since the 1970s energy crisis is a feast/famine cycle that repeats as tax credits come in and out of fashion. Without market stability, even the most efficient of industries couldn’t compete with entrenched industries. But renewable industries aren’t unprofitable; trading CO2 credits represent the largest cleantech industry in the world.

This big piece of renewable energy legislation has been caught up in Congress for months. Without policy stability there is no market stability, and investors in renewable energy are edgy over the American market. Why not just invest in Europe, or China?

However, with that investment money, renewable energy companies can build up the manufacturing base and know-how to produce their products more efficiently. That means lowering the cost for consumers.

The race is already on in solar, wind and geothermal industries to cut costs and bring home the renewable bacon. This legislation will continue to speed up that process.

In the interest of cutting costs, industries like solar and wind want to build manufacturing plants in local and regional hubs because of high transportation costs. Some states are already reaping the benefits of these jobs, which will never be outsourced. But will renewable energy industries always need government aid to survive? The answer is no, if you’re patient.

“This bill puts the Sun to work for every American, and by 2016, we expect solar energy to be the least expensive source of electricity for consumers.” Rhone Resch, president of the Solar Energy Industries Association, said in a press release in response to the passing of this bill. If Mr. Resch is right, then renewable industries are about to finally get their feet on the ground and hit it running. Hopefully that will mean cleaner, cheaper and more diversified local energy for all.

Photos via the Flickr Creative Commons: Coins by luismi1985, Capital at Night by schindler_project, and Money Roll by zzzack.