On December 18, the U.S. Senate followed the U.S. House in approving the $1.1 trillion Consolidated Appropriations Act of 2016, which includes provisions that will extend the investment tax credits (ITCs) for solar and wind projects, and will lift the 40-year ban on exporting oil. The provisions both were included in the omnibus bill as a result of a bipartisan compromise that allowed both Democrats and Republicans to lay claim to what they wanted most – the renewable energy subsidies, for the former; the fossil fuel market stimulus, for the latter.
“May the force be with you,” Senator Dianne Feinstein (D-CA), a senior member of the Appropriations Committee and a ranking member of the Subcommittee on Energy and Water Development, exhorted her colleagues, in favor of the package, according to SRECTrade, just hours after the House passed the bill by a 316 to 113 vote. Shortly afterward the Senate approved the measure by a 65 to 33 margin. President Barack Obama also signed off on the bill on the same day.
“I voted for the omnibus and tax extenders because I think our nation is best served by fiscal certainty,” Feinstein later commented. Stability and predictability in our tax code will help promote economic growth.”
The solar tax credit has been extended for five years, with a gradual decrease in funding over that time period: Effective January 1, 2017:
- Projects that break ground by 2019 – or which are placed in service after December 31, 2016, and before January 1, 2020 – will receive the current 30 percent tax credit.
- Projects that start construction in 2020 –or are placed in service after December 31, 2019, and before January 1, 2021 –will receive a 26 percent tax credit.
- Projects that begin in 2021 – or are placed in service after December 31, 2020, and before January 1, 2022 – will receive a 22 percent tax credit.
- As of 2022, the ITC will be reduced to 10 percent for non-residential and third-party owned residential systems, and to 0 percent for host-owned residential generation.
The provisions of the wind tax credit are slightly different. As approved by Congress, the incentive would remain at its present level –$0.023/kilowatt hour (kWh) – through year-end 2016. It would then be cut to 80 percent of its current value in 2017; to 60 percent in 2018; and to 40 percent in 2019. All wind projects will qualify, provided that they start construction before the end of the five-year period.
The extension will add an extra 20 gigawatts (GW) of solar power—more than every panel ever installed in the U.S. prior to 2015, according to Bloomberg New Energy Finance (BNEF). The wind credit will contribute another 19 GW over five years. Combined, the extensions will spur more than $73 billion of investment and supply enough electricity to power 8 million U.S. homes, according to BNEF.
The tax credits, valued at about $25 billion over five years, will drive $38 billion of investment in solar and $35 billion in wind through 2021, BNEF calculates. As for oil exports, the measure mandates that “ to promote the efficient exploration, production, storage, supply, marketing, pricing, and regulation of energy resources, including fossil fuels, no official of the federal government shall impose or enforce any restriction on the export of crude oil.”
“Now that we have leveled the playing field, the United States finally has an opportunity to compete and realize our nation’s full potential as a global energy superpower,” commented George Baker, head of Producers for American Crude Oil Exports, to BBC.com.