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Tax package disappoints US clean energy advocates

Clean energy groups bemoaned a compromise tax extenders deal that congressional lawmakers agreed to early Dec. 17, saying the legislation does not do enough to support technology for reducing greenhouse gas emissions.

The compromise tax package includes a one-year extension to the federal wind energy production tax credit, or PTC, and would retroactively restore an expired biodiesel tax credit through 2022. But the deal did not include an expanded investment tax credit, or ITC, for energy storage, extended investment credits for solar power, or an expansion of the federal tax credit for electric vehicles — all major priorities for clean energy advocates.

"The recently announced extenders agreement is a squandered opportunity," said Gregory Wetstone, president and CEO of the American Council on Renewable Energy, or ACORE. "While ACORE supports the modest extensions in the package, they will do little for renewable growth and next to nothing to address climate change."

The tax package, entitled the Taxpayer Certainty and Disaster Tax Relief Act of 2019, will be attached to the broader fiscal-year 2020 spending legislation that the U.S. Congress must pass before the end of Dec. 20 to avoid a government shutdown. The bill includes a one-year extension to the wind PTC, which is currently set to expire after 2019. In 2015, Congress agreed to set the PTC at 2.3 cents/kWh for 2016 and gradually ramp down the credit to 40% of its full value in 2019. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 would restore the PTC to 60% of its full value for facilities that enter service in the calendar year 2020.

The new tax package also offers a retroactive, five-year extension of a tax credit for biodiesel blending that had expired after 2017, as well as one-year extensions to lapsed tax credits for smaller-scale energy technologies such as closed- and open-loop biomass, geothermal energy, landfill gas, small hydropower, and marine and hydrokinetic facilities.

But the package excluded extensions for larger-scale clean energy technologies. The omission means an existing 30% ITC for solar energy will ramp down to a permanent 10% for projects starting construction after 2021. Democrats in the U.S. House of Representatives had been pushing to extend the solar ITC at its current level, proposing legislation in November to maintain the credit at 30% for projects that start construction by the end of 2024 before phasing it down to 26% in 2025, 22% in 2026 and 10% thereafter.

The new tax agreement also did not include the wind industry's call for a standalone ITC specifically for offshore wind farms. The bill, however, would extend an option for offshore wind facilities to use the wind energy PTC as an investment tax credit. Under the tax bill, that option was extended by year to offshore projects that commence construction by Jan. 1, 2021.

Furthermore, the Taxpayer Certainty and Disaster Tax Relief Act of 2019 left out the Driving America Forward Act that U.S. Rep. Dan Kildee, D-Mich., introduced in April. Under current law, consumers who purchase electric vehicles are eligible for a maximum credit of $7,500, with the credit beginning to phase out once an automaker sells 200,000 electric cars. Kildee's bill would raise the cap by another 400,000 vehicles per automaker and create a new credit of $7,000 for those vehicles. The credit would be eliminated six months after the automaker sells 600,000 electric cars.

Spending bills

The tax package will be wrapped into compromise appropriations legislation that congressional lawmakers will vote on the week of Dec. 16. The legislation provides $38.59 billion for the U.S. Department of Energy, up $2.9 billion from the 2019 fiscal year and $7.0 billion above what President Donald Trump requested for the agency. Within that total, funding for the DOE's Office of Energy Efficiency and Renewable Energy will rise to $2.79 billion, a jump of $411 million year over year and $2.5 billion more than the administration's request.

The bill also provides $750 million for fossil energy research and development, $188 million above the White House's request, and $1.49 billion for nuclear energy, or $669 million more than the administration sought. The DOE's recently formed Office of Cybersecurity, Energy Security, and Emergency Response would get $156 million, $36 million above the fiscal year 2019 appropriated level.

In addition, the legislation provides $9.06 billion for the U.S. Environmental Protection Agency, a $208 million increase from the 2019 enacted level and $2.83 billion above the president's proposal. State and tribal assistance grants would receive $4.25 billion, a $115 million bump up from the 2019 enacted level and $1.47 billion more than the White House sought. The bill also set aside $552 million for the EPA's compliance monitoring and enforcement activities and grants, a $24 million increase from fiscal year 2019 and $55 million above the Trump administration's request.

The House passed the fiscal-year 2020 appropriations and tax package on Dec. 17, with the U.S. Senate to vote on the measure soon after.

Although renewable energy groups were disappointed with the combined package, several provisions of the legislation pleased rural electric cooperatives. The package included the Revitalizing Underdeveloped Rural Areas and Lands Act, or RURAL Act, which would ensure that cooperative organizations do not lose their tax-exempt status when they apply for government grants, contributions and assistance.

The RURAL Act sought to address what rural cooperatives say was an unintended consequence of the 2017 GOP tax bill that considered government grants, including from the U.S. Department of Agriculture's Rural Utilities Service, to be outside revenue for purposes of determining what cooperatives or public power entities are tax-exempt.