April 15, 2024

Clean Energy Projects Face Waning Subsidies

At the same time, wind and solar companies are telling Congress that they cannot be truly competitive and keep creating jobs without a few more years of government support.

Their efforts received a boost on Thursday from President Obama, who called for a package of tax credits for renewable power as part of a broader energy plan that he outlined while on a campaign swing through Nevada and Colorado.

But the lobbying by the wind and solar industries comes at a time when there is little enthusiasm for alternative-energy subsidies in Washington.

Overall concerns about the deficit are making lawmakers more skeptical about any new tax breaks for business in general. And taxpayer losses of more than half a billion dollars on Solyndra, a bankrupt maker of solar modules that defaulted on a federal loan, has tarnished the image of renewable power in particular.

“Most of the folks I think recognize that this is not a Solyndra effort here,” said Representative David G. Reichert, Republican of Washington, who introduced a bill to extend a renewable tax credit last year. Solyndra was financed under a now-expired program, part of the 2009 stimulus package, that provided government loan guarantees for clean-energy projects, some of which administration officials expected to be risky.

The wind and solar companies argue that the tax breaks they are seeking are different. The tax credits can be taken only by businesses that are already up and running, so taxpayers are less likely to be stuck subsidizing a failing company, proponents say.

“This is a program that doesn’t pick winners or losers,” said Rhone Resch, president and chief executive of the Solar Energy Industries Association. “It’s hard to argue against a program like this that is creating jobs.”

Without the new breaks, industry executives warn, they will be forced to scale back production and eliminate jobs in a still-weak economy.

The American division of Iberdrola, a big Spanish producer of wind turbines, is already feeling the impending loss of one tax break that expires this year. “We’ve seen the prospects for new wind farms really fall off,” said Donald Furman, a senior vice president at Iberdrola Renewables, which announced this week that it was laying off 50 employees. “We’re not getting out of the business and we’re not in any financial trouble, but we are doing the prudent thing so that we don’t have issues.”

The tax break that Iberdrola and other wind companies rely on, called the production tax credit, has been in place since 1992 but after repeated extensions is now scheduled to expire at the end of 2012. It allows for a credit of 2.2 cents per kilowatt-hour of electricity generated for the first 10 years of a project’s operation, which the industry says is sometimes enough to eliminate the price difference between wind power and fossil fuels.

The Congressional Joint Committee on Taxation recently estimated that the production tax credit would cost the government $6.8 billion from 2011 to 2015 for projects in place before the end of this year.

The other tax break, which expired at the end of last year and was especially popular with solar companies, allows renewable energy companies to get 30 percent of the cost of a new project back as a cash grant once construction is complete. Without the cash grant program, a company can still take the 30 percent credit, but must spread the benefit over a period of years. The industry says the grant program is more effective because it encourages a broader range of private investors to help finance its projects.

As of early this year, the cash-grant program, known as the 1603 program, had awarded $1.76 billion for more than 22,000 solar projects, according to the Treasury Department.

Mr. Obama, who has been a steadfast supporter of clean-energy programs, has already begun making a case for new government investment in clean energy projects as a way to foster both energy independence and employment at a time when Capitol Hill evaluates new laws in terms of job creation as well as budget cost or savings.

Article source: http://feeds.nytimes.com/click.phdo?i=aec49d941c877e2166741956d4efb817