Renewable Energy Tax Breaks – Clean Energy Left Out, Biodiesel Back In

This week, as part of its annual spending bills, Congressional negotiators worked out a narrow package of tax breaks for some types of renewable energy but purposely left other clean energy sources out of the money.  On-shore wind power, small scale solar, and electric vehicles did not receive tax benefit extensions that had helped each to get off the ground, but biodiesel and renewable diesel fuel producers will receive a windfall tax credit, according to The Motley Fool.  

Why This Matters:  The final spending bill was not good for conservation and climate change and environmental groups are not happy.  Congress made a clear choice to force the nascent solar, wind and electric vehicle industries to stand on their own two feet by refusing to extend tax breaks that had helped to boost each in their early stages and arguably are still in need of the tax breaks to ensure their continued growth.  Gregory Wetstone, president of the American Council on Renewable Energy, described Congress’ failure to extend them as a “squandered opportunity” because the tax code now “will do little for renewable growth and next to nothing to address climate change,” said in a statement.  It seems that Congress chose penalized those industries that had clear climate benefits, which apparently was at the behest of the White House– how Trumpy.  

Winners and Losers In the Bill

The Department of Energy and the EPA were winners because they received funding increases despite having been proposed for huge budget cuts by the White House.  Coal miners were also winners because their pensions were funded, which is good news given the string of bankruptcies among coal-mining firms.  And the biodiesel industry got a Christmas present in the form of a retroactive tax credit — their tax breaks had expired in 2017 but Congress restored them retroactively, which does nothing to incentivize future behavior — it is simply a windfall for the big biodiesel companies like Renewable Energy Group.

On-shore wind producers failed to get a meaningful extension of their tax breaks — the industry got an extension for the credits on the front end but not the back end — projects can begin construction by the end of 2020 — a full year later — and be eligible for the credit but they still must enter service by the end of 2021. Tax credits for small scale solar projects did not receive an extension so they will phase out — that tax credit provides an average benefit of $5,000 to individual households that invest in rooftop solar.  And on electric vehicles (EVs), the car companies had hoped to extend the tax credit beyond the current ceiling of 200,000 per manufacturer, but that also failed.  The current rule is that there is a tax credit of up to $7,500 for each of the first 200,000 EVs sold by each car company — and several companies are nearing their ceilings.