Tuesday, January 15, 2013

Energy Policy in an Age of Economic Crisis

The Obama administration again managed to include some important incentives for renewable energy and energy efficiency in a law that was aimed primarily at averting economic crisis.  As you may recall, the American Recovery and Reinvestment Act of 2009 (ARRA, aka the Stimulus Act) provided $90 billion worth in grants, tax incentives, and loan guarantees, for renewables, efficiency and related research.  As I've remarked, I think it was a pretty good showing in a very unsupportive political and economic environment.

And the American Taxpayer Relief Act of 2012 (ATRA, aka the law that averted the fiscal cliff) continues this success.  Section 407 extended the Production Tax Credit (PTC) for one year, through December 31, 2013.  The PTC provides a ten-year tax credit of 2.2 cents per kilowatt-hour for electricity produced and sold by wind, closed-loop biomass and geothermal energy installations. It provides an incentive of half that amount for open-loop biomass, landfill gas, municipal solid waste, qualified hydroelectric, and marine and hydrokinetic technologies. Also, this new date is friendlier to producers because it is now the deadline by which construction has to begin rather than the deadline by which it has to be “placed in service.”  Some of the other notable “energy tax extenders” in the new law include:
• Sec. 401. Extension of credit for energy-efficient existing homes.
• Sec. 402. Extension of credit for alternative fuel vehicle refueling property.
• Sec. 403. Extension of credit for 2- or 3-wheeled plug-in electric vehicles.
• Sec. 405. Extension of incentives for biodiesel and renewable diesel.
• Sec. 408. Extension of credit for energy-efficient new homes.
• Sec. 409. Extension of credit for energy-efficient appliances.

The new law’s extension of the PTC was a particularly significant achievement because the PTC has been vital to wind energy investment and was in the crosshairs of Republicans just a few short months ago.  The figure below shows how critical the PTC is to wind energy investment (source: LBL, 2011 Wind Technologies Market Report, p.3).   Go ahead and guess which years the PTC wasn’t available because it had expired (answer: 2000, 2002 and 2004).  With the threatened expiration of the PTC, 2012 looks to have been a good year for wind energy.  As of September, 4.7 GW had been installed in 2012, and another 8.4 GW were under construction (source: American Wind Energy Association, Industry Statistics). 


- Lesley McAllister


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