The renewable energy industry had a lot to celebrate over this week’s “fiscal cliff” deal in Congress, most notably with the extension of the production tax credit for wind power. However, no sooner did President Obama sign the bill and jet off into the distance, than Representative Darrell Issa (R-CA) vowed that his oversight committee would put the particulars of the extension under a microscope.
Given the nature of his complaint, as reported by The Hill, it looks like the bill’s treatment of algae biofuel could be in for some intense scrutiny as well, and Issa wasn’t too happy with the geothermal provisions, either. Oops…
Wind Power Extension Under Scrutiny
If this scenario seems to ring a bell in your head, maybe you watched a lot of Disney movies back in the day. There always seems to be some point early on when celebratory fireworks fill the screen and the hero jets triumphantly away, but since the movie isn’t nearly done you can bet that off in some dark corner a revenge plot is being hatched.
In the case of the production tax credit for wind power, Issa has taken issue with the bill’s new definition for projects that are covered under the one-year extension.
Previously, projects that were completed within the extension period qualified for the tax credit.
In the new legislation, the qualification was changed to include any project beginning construction within the extension period.
As reported by Zack Coleman of The Hill, in Issa’s view, that counts as a “‘dramatic’ alteration” of the tax credit program. However, given that a modern, large-scale wind farm typically takes from 18 months to two years to complete, a one-year extension under the old definition would have been meaningless for all practical purposes, except perhaps for small-scale installations.
Look Out Algae, You’re Next
According to The Hill, Issa’s complaint also included biomass, and this is where algae biofuel might encounter a similar roadblock.
Biofuels International has reported that, in addition to extending a tax credit for biofuel for another two years, the new bill also expands the definition of cellulosic biofuel production.
Algae biofuel, which was previously not included in that definition, will now qualify for the same breaks. According to Biofuels International:
“Producers dabbling in algae-based fuel will also be happy with this outcome as the medium now qualifies under an expanded definition of cellulosic biofuel production. Everyone under that umbrella term will continue to recoup 50% of their eligible capital costs in the first year for facilities up and running before the end of 2013.”
In addition, algae producers will also qualify for the same production tax credit as other cellulosic biofuel producers for another year.
Geothermal on the Chopping Block
The geothermal industry has been celebrating its gains under the new bill, and it’s not hard to see why. The same type of change given to the wind industry also applies to geothermal, which means that any project starting construction within the next twelve months will qualify for the production tax credit.
As with wind power, under the old definition, a one-year extension for the tax credit would have effectively put the kibosh on new large-scale geothermal projects.
In a statement applauding passage of the bill, the Geothermal Energy Association made a case for the economic benefits of the new definition:
“The Geothermal Energy Association estimates that new geothermal power projects in as many as a dozen states could be stimulated to move forward this year as a result of this change. Congress’ action will spur significant new employment and sustain geothermal industry growth. Consumers and utilities will benefit, as well, because developers will have greater certainty about whether the credit will be available for their project.”
When you consider the vast potential of geothermal energy in the US, there’s no wonder that the industry is so excited. According to a recent project funded by Google.org, researchers have estimated that there are three million megawatts in geothermal resources in the US.
It’s also worth noting that the US Department of Energy has just released a new open source map called the National Geothermal Data System (check it out at geothermaldata.org), which will help geothermal developers identify suitable sites more quickly and economically.
Raining on the Alternative Energy Parade
The wind, biofuel, and geothermal communities are happy for now, but Issa’s complaint is no idle threat. As chairman of the House Committee on Oversight and Government Reform, he could make it extremely difficult, if not impossible, for any additional extensions or expansions of public support for alternative energy production to occur.
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