Right now, almost all of the profits from our energy system (the largest industry on the planet) flow to a few huge companies. In 2012, as gas prices in some parts of the country hovered around $5.00, Exxon Mobil was making $104 million in profits per day. No wonder fossil fuels own Washington.
Imagine if just a small fraction of that kind of money was flowing back into communities around the country.
Imagine community centers and schools saving money on their utility bills by putting up solar panels on their roofs. Imagine farmers’ cooperatives with crops and cattle beneath community-owned windmills.
Imagine a nation of voters who are not energy consumers, but energy producers.
This kind of vision has been floating around since the time of Edison. What is unique about the present moment is that we finally have the cost-effective technology to make the vision a reality.
In fact, in many places, the vision is already becoming reality: Portugal just met 70% of its energy demand via renewables for three months in a row. Solar power is officially at grid parity--meaning it’s as cheap for grid electricity consumers as any other fuel source--in India and Italy.Denmark got 30% of its power from wind in 2012 and is aiming for 50% by 2020. Australia recently announced that it now hosts 1 million solar arrays on the roofs of its businesses and homes.
The biggest story of last year was Germany. The country gets about as much sunlight as Alaska. But one sunny day last summer, the Germans set a world record for clean energy by producing half of their noonday electricity—the energy equivalent of the output of 20 nuclear power plants—from solar. Even more amazing is the fact that the vast majority of Germany’s solar resources are owned not by large utilities, but by everyday people. Fully three-quarters of the country’s solar capacity, and half of its wind capacity, is locally owned.
Here in the U.S. we’re moving along a similar trajectory. In California, the number of residential rooftop solar installations went from 500 in 1999 to more than 50,000 in 2011. In 2012, we set records for both wind power and solar power installations. And in 2013, America will add more new solar energy than any other kind of energy capacity but natural gas. January was a particularly notable month: all of the new energy capacity installed in the United States during that month was clean energy capacity.
But we can still go faster. In fact, we’ll have to go faster if we want get to 100% clean energy in time to put a dent in climate change. John Farrell of Energy Self-Reliant States notes that for every 2 kw solar array on top of a residential roof, the United States gains two adult voters in favor of solar energy. Long before clean energy makes up 50% of our energy mix, we can get to a situation where clean energy voters make up 50% of our electoral mix.
That’s the real tipping point. That’s why we need to break down the barriers that keep people from participating in the clean energy economy.
So here’s a modest proposal: let’s open up to ordinary people some of the incentives for clean energy investments that big banks already enjoy. Specifically, let’s make it much easier for anyone to access the federal Investment Tax Credit.
Thanks to the federal Investment Tax Credit, investors can receive as much as 30% of the capital they put into clean projects back as a tax credit, which they can use to reduce their overall tax burden. As it stands now, though, this tax credit can only offset what the government calls “passive activities income.” A good example of passive activities income would be income from a rental property. The owner is not actively participating in generating the income; the income passively accrues.
As the above example suggests, the trouble with this system is that most individual Americans don’t have passive income--particularly not in large enough quantities to justify participating in the complex legal contracts tax equity investments involve. This in turn means a few huge institutions—think Wall Street and large banks—dominate the energy development market. And as for non-profits? Well, they aren’t taxable in the first place, meaning that any incentives through the tax code are difficult to access.
Changing the Investment Tax Credit is, in the context of our gridlocked political system, relatively low hanging fruit. It would do more than any other available policy change to open the clean energy economy up to us all, which would in turn do more to speed the transition to 100% clean energy.
It’s time that we can all benefit from the same clean energy tax breaks that big banks already enjoy. If we’re going to build a distributed energy system, a good place to start will be to build a distributed incentive program.