Great news out of California, Pacific Gas and Electric recently agreed to purchase power from new 800 MW PV soalr installation..
Sound great, but there is a twist in the tale that is not just an issue for this project, but for practically every large scale wind and solar renewable project out there. A almost throwaway at the end of the article reveals all:
PG&E has said the deals are contingent on Congress reauthorizing several tax credits for renewable energy that are due to expire at the end of this year. Although there is broad bipartisan support for the credits, their renewal has been caught up in the debate over other controversial issues like offshore oil drilling and how to pay for the tax credits.
"This is contingent on the (renewable-energy tax credits) being reinstated," Borenstein said. "If Congress screws up and lets that lapse, this could be put on a shelf."
The renewable energy tax credits being discussed are the PTC (production tax credit) and the ITC (Investment Tax Credit). These tax credits are set to expire at the end of the year and despite bi-partisan agreement that the credits need to be extended, they have not been.
What is the PTC and ITC?
The PTC provides a 2 cent per kwh production credit for renewable energy. It has been a part, off and on of the US tax code since 1992.
The ITC provides a 30% tax credit to the installation/capital costs of new solar installations. Many of you may be familiar with it as an incentive to make rooftop PV more affordable, but it also extends to large commercial solar.
Both of these tax credits are set to expire at the end of 2008. While the House has voted to extend, the Senate has not.
Why hasn't the Senate voted to extend
The fascinating thing here is that there is bipartisan support that the tax credits need to be extended, but how to pay for them?
Tax credits need to be funded somehow or other, yet politics is the usual culprit:
The irony is that industry lobbyists report bipartisan support for the provision in the Senate, where the vote fell nine votes short of the three-fifths supermajority needed. Six members did not vote, including Sens. John McCain and Barack Obama. (The national governor's association has also come out in support of granting a long-term extension of the solar tax credits.)
One source tied to the solar industry said that many Republicans were loath to support the extension "because they don't want to give the Democratic Congress any credit" before the election. Previous attempts also were stymied by oil lobbyists, who fought efforts to close a tax loophole on oil companies to pay for the tax credit extension.
As the calendar turns to the fall, the odds increase that the solar tax extension could become hostage to the presidential contest.
Still, there is work being done. Enter the "Gang of 10" with the controversial agreement that many focused on because of the offshore drilling. Lost in the hullabaloo was that the agreement would extend the tax credits for five years. Ideally it would e extended longer, but five years is still longer than any extension in the near past.
What Could Happen Without the Credit?
Several things could happen, but the outlook for US production of renewable power is not favorable. In the past when the PTC has been allowed to lapse it has had serious consequences on wind development
Besides Pacific Gas & Electric, how about the developer of large solar in Arizona, Abengoa Senior Edvisor Fred Morse:
Abengoa Solar will not, Morse confirmed, build its planned solar power project, Solana, in Gila Bend, Az., unless the ITC is extended. Because the ITC extension is also getting down to the wire (by the end of this year) inaction is already causing delays in the plant’s construction and could cause difficulty in financing.
In fact Morse says the company is already moving slower on Solana because its waiting to see if the ITC will be renewed. The company is also worried that the longer they hold back on any construction steps because of the ITC, the more construction could cost. Solana requires 3 square miles of steel — another Golden Gate Bridge — says Morse, and in the meantime the price of steel keeps going up.
or others:
What is becoming clear is that solar companies are starting to realize that they might need a Plan B. Solel CEO Avi Brenmiller has said that his company won’t be able to build a planned 553 MW solar thermal project without the credit. And the CEO of solar panel maker SunPower recently said it would start focusing on markets outside the U.S. if the credit doesn’t survive.
Or how about the assessment of the California Public Utilities Commission:
Possible expiration of the federal Production and Investment Tax Credits is the number one source of risk to new RPS generation expected to come online by 2010. Unfortunately, this is also the area of risk over which the state of California has the least control.
A chart in the report shows that 70% of California's 2010 renewable production is considered at risk.
Now I am not here advocating the Group of 10's plan, I am just trying to highlight the importance of this. I am hoping to show that the issues here are broader than just offshore drilling, but the need to ween ourselves from oil completely and to green our future.