Tuesday, January 15, 2008

US Congress Expected To Extend Renewable Energy Tax Credits

US Congress Expected To Extend Renewable Energy Tax Credits


The U.S. Congress is expected to extend expiring renewable energy production and investment tax credits in the new session, industry experts and lawmakers say.

Although the White House has objected to offsetting the proposed multi-billion dollar credits by cutting tax breaks given to the oil and gas industry, lawmakers may include the credits as part of an economic stimulus package or a tax credit extension package, insiders say.

A $21 billion energy tax package that would have cut tax breaks to the top five major oil companies in order to fund renewable energy projects fell victim to repeated veto threats from the White House and wasn't included in a major new energy law passed late last year.

Solar companies such as Evergreen Solar (ESLR) and Emcore Corp. (EMKR), and wind turbine manufacturers such as Vestas Wind Systems (VWS.KO), Gamesa Corporacion Tecnologica (GAM.MC) and Siemans Power Generation, a unit of Siemans AG (SI), count on the credits to build demand in the U.S. The industry says it needs the credits - some of which expire at the end of the year - to offset the costs of expensive electricity generation projects.

Senate Majority leader Harry Reid, D-Nev., said in December that Congress would vote again on the tax proposal "more quickly than you think," and Sen. Jeff Bingaman, D-N.M., chairman of the Senate Energy and Natural Resources Committee, said it had become a matter of urgency for many firms in the sector.

Jaime Steve, legislative director for the American Wind Energy Association, said the credits were "vitally needed to keep momentum going in the industry and keep creating jobs."

"If the credit is not extended in the next two to three months, we'll see a downturn in the industry," he said.

Lawmakers are now searching for ways to include the two major tax provisions - a renewable energy production credit and an investment credit - into other legislation, including a farm bill and fast-developing legislation that would give a boost to the economy.

Democrats have said they would work with President George W. Bush to develop a proposed major stimulus package to counter growing fears of a recession.

"The No. 1 opportunity is in an economic stimulus package," AWEA's Steve said, adding, "That would be a perfect place in an renewable production tax credit." The cost would depend on how long the credits were extended. In the energy tax package, the renewable production credit would have lasted three years, costing around $6 billion.

"We're looking for extension of current law as long as possible...because it provides certainty for investors," Steve said.

Although Steve said he believes paying for the offsets by cutting tax breaks to the oil industry is likely off the table, Mark Kibbe, a senior policy analyst at the American Petroleum Institute, is still watching Congress carefully.

Kibbe, a tax specialist at API, said he'd heard of several alternative options to include the renewable tax credits, including a tax-extenders bill that Congress has come to pass on a near annual basis that prolongs a raft of non-permanent but popular tax rules.

"I don't think they'd move the entire (energy tax) package over, but the the Section 45 renewable energy production credit is a logical one and would not be such a stretch," Kibbe said.

The API analyst said he'd also hear of another creative solution: the Federal Aviation Administration's reauthorization of the collection of excise taxes, which expires in March. If Congress lets the reauthorization expire for a day, and then reauthorizes the agency's authority, Kibbe said it could be considered new revenue, "and they get to spend all those billions of dollars as offsets."

No comments: