It’s now 2014 and we have a busy year ahead: much needed legislation to revive the tax provisions that just expired, federal energy tax reform, EPA’s rulemaking to curb carbon pollution for existing power plants, energy efficiency legislation, and much more. Then there are the midterm elections, with which all of this will have to contend.
Unfortunately, last year ended with a number of tax provisions critical to advance energy expiring due to arbitrary deadlines set the last time they were renewed. It’s now up to Congress to retroactively extend those tax credits once again, and as soon as possible. Otherwise, financing for land-based and offshore wind power, geothermal, biofuels, energy efficiency, and other advanced energy investments will become significantly more challenging, for no reason other than federal inaction.
Take wind, for example. Wind energy is now fully price-competitive in some markets, but not in most. Without the production tax credit (PTC), many projects will grind to a halt or drop off the drawing board. But wind energy is a resource worth developing wherever the wind blows. It’s one of many energy sources we need for fuel diversity, clean air, and energy independence. Wind energy manufacturing and installation has also become a substantial industry – an estimated $9 billion in U.S. revenue last year. Pulling the tax credit plug at an arbitrary date, without a thoughtful dialogue on the value of continued government support for a vital energy technology, is disruptive and damaging to an industry that is still far from reaching its full potential.
AEE supports transitioning to a new energy tax framework based on our core tax reform principles, but in a gradual and orderly fashion that maintains certainty and predictability for businesses and investors. The abrupt cessation of tax benefits is disruptive to the marketplace and harmful to consumers who want secure, clean, affordable energy. In this new year, AEE will work for a retroactive and multi-year extension of the just-expired credits, as well as a modification of the business energy investment tax credit (ITC) to allow all eligible facilities that commence construction by the end of 2016 to qualify.
Speaking of federal tax reform, mere days before the Senate was set to adjourn for the year, Senate Finance Chairman Max Baucus (D-MT) released a draft proposal to reform energy tax credits. “I congratulate Sen. Baucus for jump starting a much needed debate on energy tax reform,” AEE Senior Vice President for Policy and Government Affairs Malcolm Woolf said in a statement. “AEE hopes that his discussion draft leads to a new approach for energy tax policy, one that is technology neutral, provides stability and predictability, and uses market forces to drive better energy options.”
The discussion draft from Sen. Baucus will be just the start of the energy tax reform conversation, which will take place over the coming year, and beyond. That’s especially true considering that, in a odd turn of politics, within hours of his plan’s release it was reported that Sen. Baucus would be nominated to become U.S. Ambassador to China. The impact of Sen. Baucus’s likely departure, following confirmation, is unclear, but if Sen. Ron Wyden (D-OR) succeeds Baucus as chairman of Finance, as many expect, the push for energy tax reform should continue.
Beyond tax policy, the most significant opportunity for advanced energy businesses could lie in helping states across the country comply with EPA’s carbon regulations for existing power plants, now under development. AEE, our business members, and partner organizations will be engaging in the process as the regulations are proposed, refined, enacted, and then implemented through state-by-state plans. EPA is expected to release proposed regulations this June and finalize them by June 2015.
The Shaheen-Portman energy efficiency bill remains the most relevant advanced energy bill with momentum coming into the new year. We expect the push to be renewed in the coming months as it was bumped last fall by the government shutdown and budget negotiations. With strong bipartisan support, this legislation could represent energy progress for lawmakers on both sides of the aisle to tout in the 2014 election season.
While the prospects for other pieces of energy legislation are uncertain, AEE also supports efforts to institute a national renewable energy standard as well as an energy efficiency resource standard. We’ll be following the efforts of Senators Mark Udall (D-CO) and Tom Udall (D-NM), as well as Ed Markey (D-MA), in pushing these proposals. In addition, we’ll be advocating for the MLP Parity Act. Also, AEE supports a strong Renewable Fuel Standard, which is a major priority for the biofuels community and will continue to be challenged this year.