Renewable Energy vs. Fossil Fuels with New Tax Plan


President Trump’s tax plan is aimed at cutting taxes and giving corporate America more money to produce more goods and services and to hire more workers to do the jobs that he would anticipate. There are, however, winners and losers in the corporate sector and notably among energy businesses.

To that end, the bill that has now been introduced in the House would continue to favor oil and gas development, noting that those fossil fuels make up most of the country’s energy use and that they are expected to do so in the coming decades. Such fuels have been, moreover, at the heart of the country’s economic development given the abundance of newfound shale oil and supplies.

But the losers would be the renewable energy sector that has received some generous tax credits and that has promised to eventually stand on its own without government support. With that, the 2.3 cent per kilowatt hour of wind energy generated would be reduced to 1.5 cents — something that concerns high technology enterprises that have come to rely on that output to power their businesses.

All producers are, in fact, fighting to get their slice of the government pie: renewable advocates argue that they want to be able to compete with fossil fuels on a level playing field while those producing natural gas and coal say that they are responsible for a much larger share of the electric generation portfolio, not to mention oil’s dominant role in the transportation sector.

At the end of 2015, US lawmakers agreed on a deal to extend the wind and solar tax credits — benefits that have been relegated to horse trading so that each gets what it wants. In that deal, the credits would gradually diminish through 2019. Wind and solar projects could opt instead to take a 30 percent investment tax credit that reduces their federal taxes dollar-for-dollar by what they put into the project. The main difference is that the solar production tax credit will phase out at the end of 2022.

“There is a consensus in the wind industry that another extension after this one phases out is unlikely,” Clint Johnson, a wind analyst and director of project development for DNV GL previously told this writer. Wind energy — the cost of construction and wind turbines — has fallen by 50 percent over five years, he adds.

“On the solar side, the ramp down is an acknowledgement that solar is becoming economically competitive with other fuel options,” Ray Hudson, director for DNV GL’s solar segment adds, during the same phone call. The cost of solar panels is dropping precipitously, noting that the theory is that they fall 20 percent for every doubling of capacity.

The US wind industry had nearly 30,000 megawatts of wind capacity under construction or in advanced development as of the end of the third quarter of 2017, the American Wind Energy Association reports. That’s a 27% year-over-year increase and the highest level reported since the trade organization began tracking both categories at the beginning of 2016.

Utilities announced new plans to develop and own 3,040 MW of wind capacity during the third quarter, it added. Meantime, project developers announced 1,337 MW of power purchase agreements (PPA) signed — deals where either other power companies or major businesses such as Google, Facebook, Apple, Intel and Amazon buy the output at fixed prices over a set number of years. As such,  the trade group said that six corporate customers signed PPAs during the third quarter, accounting for 62% of total project capacity contracted.

There are now 84,944 MW of installed wind capacity in the United States, the wind association said. Emissions in this country are much lower as a result of that investment.

Take Google: it says that its decisions to invest in green energy not only generate a return but that they also give the marketplace what it seeks: clean energy that has a benign effect on the environment. In fact, the levelized cost of wind energy — the unit cost of electricity over a lifetime — is the best energy value there is, it says.

“The role of state policies has been tremendously important,” says Marsden Hanna, Google’s lead global energy policy and markets, in an interview. “We do believe it important, however, that actors at all levels continue to maintain the momentum, including the federal government.”

The tax bill would furthermore take away the $7,500 tax credit given to buyers of electric vehicles, which includes plug-ins that also use gasoline.

And finally, the same bill preserves the major tax benefit given to oil and gas developers by allowing them to keep their intangible drilling deductions whereby they can more quickly recoup their investments in projects.

“The oil and natural gas industry stands ready to work with Congress and the administration to enact strong, pro-growth tax legislation to ensure that our industry remains a major driver of economic growth, investing billions each year in the U.S. economy and supporting over 10 million U.S. jobs,” Jack Gerard, president of the American Petroleum Institute said in the release.

Photo credit: Flickr Creative Commons, “John”

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