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US Senate panel vows legislation after review of temporary energy tax credits

The U.S. Senate Committee on Finance plans to put together legislation soon regarding energy tax credits, including many that have expired or are set to do so soon, after a committee task force finished a review of the incentives that involved gathering feedback from industry.

Among other things, the task force heard strong support for an investment tax credit, or ITC, for stand-alone energy storage projects, while renewable groups advocated for the extensions of an offshore wind power and a federal solar energy ITC. The review was aimed at finding a long-term solution on the tax breaks, the temporary status of which has been a source of uncertainty for the power industry.

In May, the committee formed several task forces, including one focused on energy, to examine dozens of temporary tax provisions that have expired since late 2017 or will end after 2019 without further authorization from Congress. The energy task force evaluated 12 such temporary tax policies, including for electricity produced from certain renewable resources such as geothermal energy, open- and closed-loop biomass power, incremental hydropower projects, and marine and hydrokinetic renewable energy sources.

"The next step will be to put together a legislative package based on the proposals that the taskforces received, the areas of consensus among the task force members and continued bipartisan discussions," Senate Finance Committee Chairman Sen. Chuck Grassley, R-Iowa, said Aug. 13. "Taxpayers deserve predictability and clarity, and they haven't received either for far too long on temporary tax policy."

Grassley said the legislation will be a "top priority for Congress" when lawmakers return in September following a month-long summer recess.

A common theme among stakeholders contacted during the review, which included the American Council on Renewable Energy, or ACORE; Siemens AG; and Avangrid Inc., was the disruptive effect of frequent lapses in temporary energy credits. Stakeholders also pushed for the establishment of a level playing field for all energy sources, noting that many tax incentives and breaks for fossil fuels have existed for over a century while renewable energy credits are newer and often require frequent periodic renewals.

"The nation's aging energy infrastructure requires modernization, and a technology-neutral tax incentive would simplify the existing system, drive economic growth and promote competition to ensure low power costs for consumers," ACORE said. The group supported a bill from Senate Finance Committee Ranking Member Ron Wyden, D-Ore., that would eliminate most existing energy tax code provisions in favor of three credits that would reward the lowest-emitting sources of energy.

The American Wind Energy Association, or AWEA, echoed ACORE's comments, backing a "widely applicable, transferable technology-neutral tax credit based on carbon emissions." But absent a broader restructuring of energy tax policy, the group said the task force should consider allowing for the transferability of clean energy tax credits among project participants, extending an existing 30% ITC for offshore wind projects, and creating a federal ITC for stand-alone energy storage projects.

AWEA was mum, however, on the fate of a federal wind production tax credit, or PTC, that is set to expire at the end of 2019. The U.S. House Committee on Ways and Means proposed a one-year extension of the wind PTC in a bill released in June, but the Senate Finance Committee excluded a similar provision from its own tax extenders legislation released in February.

The establishment of an expanded ITC for storage has garnered support across power industry groups and was a frequent request from participants during the task force review. A coalition of organizations, including ACORE, AWEA, the Solar Energy Industries Association and ClearPath Action, have urged passage of the Energy Storage Tax Incentive and Deployment Act, which would allow nearly all stand-alone battery or other storage projects to qualify for a 30% ITC that would ramp down over time. Currently, only storage projects paired with solar power can qualify for the credit.

In addition to supporting the stand-alone storage ITC, the Solar Energy Industries Association pressed for an extension of a 30% ITC for residential and commercial solar energy property, citing the damaging effect of the Trump administration's tariffs on imported solar panels and related materials. In 2022, the solar ITC is scheduled to drop to 10% for commercial tax filers and be eliminated entirely for residential filers.

"The solar industry is a new American industry that, with the right policies in place such as the ITC, can provide a bright future for American business and the American people," the Solar Energy Industries Association said. "The solar ITC works well and will continue to work if extended."