Extending Clean Energy Tax Incentives Fails to Take Flight in FAA Reauthorization

As the Federal Aviation Administration Reauthorization Act of 2016 flies back to the House, it does so without important clean energy tax credits that were under consideration as part of the measure. That’s a shame because clean energy tax credits have already proven effective at delivering energy efficiency and clean, renewable energy to the nation’s consumers at an exceptionally low cost to the taxpayer while cutting harmful pollution.

For example, the federal tax credits for wind and solar power development that Congress wisely renewed and reinstated as part of last year’s omnibus spending bill will on their own help deploy as many as 53 gigawatts of wind and solar power by 2020—enough to power the equivalent of 14 million homes. And this this also creates jobs, provides benefits to local communities, saves businesses and consumers money, and helps ensure America remains a global leader in clean technologies in the 21^st century.

But more is needed. Incentives for clean energy don’t just help level the playing field—fossil fuels have received subsidies for almost a century, after all—they also drive renewable energy and energy efficiency demand, thereby speeding economies of scale, spurring competition in the marketplace and investment in new technologies.

Wind Power

We are seeing this transformation right before our eyes. Earlier this week, MidAmerican Energy Company announced that it is filing an application with the Iowa Utilities Board to build Wind XI, a project that will add up to 2,000 megawatts of wind generation in Iowa, at a total project cost of $3.6 billion. This announcement is a giant step toward realizing the company’s vision of 100 percent renewable energy for customers in that state. And just last month DOE approved the Plains and Eastern Clean Lines Project, a critical transmission project to bring 4,000 megawatts of clean, low-cost wind energy from the Oklahoma panhandle to customers throughout the southeastern United States—delivering more than four times the electricity output of the Hoover Dam.

However, offshore wind energy continues to represent our largest untapped clean energy resource. Wind turbines off our coasts can harness fast wind speeds to power our homes and businesses with pollution-free energy and has the potential to generate tens of thousands of U.S. jobs in the supply chain that includes manufacturing, construction, and marine transportation. And yet, there are still no operating offshore wind facilities in U.S. waters. Long-term incentives for offshore wind like proposals introduced by Senator’s Markey and Whitehouse and Senator’s Carper and Collins will be critical to the success of the industry as the full potential of this resource is realized. The current incentives that offshore wind development can take advantage of will expire by the end of 2019, likely before significant offshore wind projects begin.

Energy Efficiency

The cheapest and cleanest energy resource is the energy we don’t have to use. Despite the many benefits of energy efficiency, opportunities fail to be implemented because of longstanding obstacles like lack of information, upfront costs, and a disconnect between who buys the equipment and the person paying the energy bill. Tax incentives for energy efficiency overcome these market barriers by attracting producer and consumer attention to the opportunities and transforming markets for new technologies and practices. In addition to reducing pollution and saving money for consumers and businesses, energy efficiency incentives have the benefit of creating jobs both directly to make homes and businesses use energy smarter, but also indirectly because when utility bill savings are spent in other parts of the economy, it stimulates growth.

Energy efficiency tax incentives for buildings, industry, and manufacturing have a proven track record of delivering results. For instance, a $2,000 tax credit to builders who achieve a 50 percent reduction in energy use compared with a home built to the 2006 minimum code, has helped transform the market for new homes. In just four years, the percentage of homes qualifying for—and receiving—this credit grew from practically zero to 10 percent. While the new homes credit has arguably been the most successful tax incentive for increased energy efficiency, all performance-based incentives have helped shift markets toward more efficient products and practices.

These tax incentives for residential and commercial buildings need to be enhanced, strengthened and extended to deliver even greater economic and environmental benefits as they are set to expire at the end of this year. For instance, Section 179D, which offers a tax deduction to the owners of highly efficient commercial and multifamily buildings, is in need of enhancements to increase the deduction’s success at promoting very efficient new buildings. There also is strong support for improvements to the current 179D deduction to increase its effectiveness at encouraging retrofits of existing buildings.

More Jobs

The more than 2.5 million people working in the clean energy sector in America demonstrate that it is a strong industry that’s adding economic and environmental value to the nation. Thanks in part to the existing clean energy tax incentives, we can expect clean energy to continue its steep growth trajectory. However, many opportunity remain to capitalize on clean energy’s true potential. Not to mention, Americans overwhelmingly favor government support for clean energy, as poll after poll shows.

Congress may have missed this window on FAA but that should not stop them. So, let’s get it right and strengthen, enhance, and extend important clean energy tax incentives as soon as possible.