Tax committee considers PTC and other incentives

A House subcommittee heard expert testimony on how the continuous start-stop of the production tax credit stalls economic growth.

Bill Opalka | Jun 10, 2012

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A U.S. House subcommittee of the Ways & Means Committee on June 8 heard considered how best to use the properly use tax credits to stimulate economic activity, while entertaining suggestions on how to rationalize the code. This is particularly relevant to the wind industry, which needs an extension of a popular subsidy while facing increased opposotion to its extension beyond this year.

Several provisions for targeted economic growth, including the wind-favoring production tax credit (PTC) need to be extended for construction to continue beyond tis year, industry advocates insist. Several projects have been cancelled and order books for construction next year are empty. Manufacturing to support the supply chain has started to feel the effects.

The so-called “tax extenders” are various provisions or incentives that are enacted by Congress with an expiration date, usually requiring an annual or semi-annual extension. As members and experts pointed out, once added to the tax code, these provisions are rarely eliminated, but repeatedly need action that creates enough uncertainty to impair business planning.

.Rep. Kenny Marchant (R-Texas) asked pointedly about the renewable energy tax credits. “In discussing the merits, it was indicated these taxpayers support would only be required for the amount of time necessary for these industries to mature,” he said.

Alex M. Brill, a research fellow at the American Enterprise Institute, said that was one of the hardest issue Congress faces, in determining the rate of technical progress, or how long a credit is needed.

“The ability to wean an industry off of these credits has proven to be very difficult,” he added.

He said no tax policy should be intentionally temporary and that any tax extenders deemed appropriate should be made permanent and the rest should be allowed to expire.

“In the absence of externalities, a tax credit or other subsidy for a given activity will generally lead to a misallocation of resources in the economy -- more of the subsidized activity, but less of everything else. A provision that simply leads to more of a particular activity does not necessarily promote overall economic growth,” he said in his testimony.

An April hearing before the same subcommittee showed wide, bipartisan support for a renewal of the PTC. That fact was continuously referenced at the recent American Wind Energy Association conference in Atlanta.

Rep. Pat Tiberi, Republican of Ohio, a PTC supporter and chair of the Subcommittee on Select Revenue Measures, said supporters in both parties are looking for an extension while addressing the long-term objections.

“We have a lot of bipartisan support for phasing out this tax credit over the next several years,” he said.
“Like decisions about spending, deciding whether to extend an expiring tax expenditure involves considering whether the benefit of the intended outcome is worth the effect on other programs or tax rates,” said James R. White, director of strategic issues for the U.S. Government Accountability Office.

Those decisions are coming due as AWEA has said it is looking for legislative vehicles in which to extend the PTC this summer.

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Comments

Renewables Need PTC

Wind, solar and other technologies are making great strides in energy production and widespread adoption.  So are your tax dollars better spent on subsidies to the fossil industry?  And don't just say "we should end all subsidies", because 1) that's disingenuous on your part, and 2) renewables in their current form have only been around for 10-20 years; whereas fossils have had a 90 year headstart. 

Wind and solar equipment is manufactured all over this country: turbines by GE, inverters in Oregon, Georgia, Colorado, panels in AZ, Tennessee, New Mexico, California, and battery technology in Michigan.  Shall I go on?  This is not some phantom industry - in 2011 Germany installed 7 GW of solar.  That's right: a place with terrible weather (average 51 deg latitude).  They did the SAME amount in 2010.  It is working, and if you continue to refute that fact, then you are a fool.

Wind needs the PTC because it is a capital intensive technolgy, but nonethless extremely worthwhile.  A fact you all fail to mention is the jobs aspect... Steel prices have come down, concrete production in this country is going up, and all of the ancillary industries which support renewables are also creating jobs.  Up and down the chain.  But the way, U.S. manufacturers make several different sizes of turbines - 2.5kW up to 2MW.  The extension of the PTC is vital to the growth of the renewable industry, despite of the fossil industry has to say about it.

Incentives have limited impact with a big price

Instead of taking the money out of our tax dollar, congress should look to a non-deficit spending solution.  All of us have utility bills.  If we could afford wind or solar installation, then a payment plan with modest interest would be possible over a period of 6-10 years.  This highly conditional Federal loan to utility consumers (not corporations) would fuel an energy revolution in this country.  A further condition, that American Manufacturing is required for at least the first five years, will lay the groundwork for over a $250B shot in the arm over the first 3 years of implementation.  No other single stimulus package can deliver  manufacturing, construction, and service revitalization, as well as individual and national energy independence.   Large wind turbines will not get us out of our economic and energy dilemma, enabling the consumer the buy the Model-T of wind turbines will.

End Them..

Further to the preceding comment: subsidies actually hold prices high while curtailing innovation. Why innovate toward lower pricing when there is no economic need to do so? The wind "industry" has had years to "get it right". It hasn't...which may mean it can't but it's more likely it won't.

One of the problems with subsidies is that there is no way to calculate the damage of NOT allocating those funds toward an economically sustainable energy goal.

Our current national energy policy can be stated as "all things green at any price": a Utpian dream and economic nightmare. It's way past time for engineers to start pushing back on what we all know in our heart-of-hearts is folly. Too much real/beneficial work goes wanting.

PTCs are a waste of money

PTCs for wind encourage investment in a technology that has not matured into an economically competitive way to make electricity.  The trickle-down effect of building these wind farms which use really massive quantities of concrete, steel, copper, and other materials of construction on a per MWh basis is to raise the price of those materials for any other business or government project needing these materials.

Providing this economically uncompetitive technology with PTCs encourages still further proliferation of the technology in its present status rather than furthering research and development.  It also skews those electricity markets that utilize free market wholesale generation.  It provides a bunch of rich investors free cash at the expense of those citizens who do pay income tax and at the expense of those businesses not involved in wind power.