Renewable Energy

Santa Might Come Late this Year: Orphaned Renewables Pushed Back to Broader 2018 Tax Extender Debate

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December 22, 2017

With the year winding down, Congress got down to the wire on a continuing resolution that will fund the government through January 19, 2018. Both chambers passed the stop-gap funding measure on December 21. When Congress returns from the holiday break, they will only have a few weeks to either set budget priorities, or punt once again, using a continuing resolution. One sore area for renewable supporters has been “orphaned” renewable technologies, which were left out of the last production tax credit (PTC) extension in 2015 and continue to be at a disadvantage compared to other forms of energy generation.

Though Members of Congress have promised to correct the oversight, the “orphaned” renewable technologies have been excluded from the recently passed tax overhaul. These “orphaned” renewable technologies include electricity generated from biomass, geothermal, municipal solid waste, qualified hydropower facilities, as well as marine and hydrokinetic facilities. These technologies were inadvertently left out of the deal to reinstate the 48C Investment Tax Credits for renewables (while phasing them down by 2022), a deal which was part of the December 2015 omnibus spending package. Wind and solar credits were extended and set on a phase-out schedule, and these provisions were maintained in the recently passed tax overhaul.

The recently passed tax package also did not include an extension of the biodiesel tax credit, which expired at the end of 2016. But these renewable financing incentives may be back on the table in early January.

On December 21, Senate Finance Committee Chairman Orrin Hatch (R-UT) introduced the Tax Extender Act of 2017 (S.2256), which would reauthorize dozens of tax extenders, including those for the orphaned renewable technologies, as well as the sought-after $1 dollar per gallon biodiesel blender’s tax credit, which expired in 2016. It also reinstates expired credits for cellulosic biofuels producers, fuel cells, energy efficiency, solar water heaters, geothermal heat pumps, and more.

The expiration of the biodiesel blender’s credit, along with lower than expected volumes under the Renewable Fuel Standard for 2018 and 2019, has put negative pressure on domestic biodiesel production and also caused RIN prices to increase. RINs (renewable identification numbers) are the tradable compliance mechanism for the Renewable Fuel Standard. While Texas Senators Ted Cruz (R) and John Cornyn (R) have sought relief for the refining industry from RIN prices, the biofuels industry maintains that increasing the use of biofuels will cause credit prices to fall.

According to Reuters, RIN prices would soften if the $1 per gallon tax credit were reinstated, as it would “entice biodiesel makers to ramp up production and would make it more cost-effective for blenders to use [the fuel].”

The bill also includes an expansion of the carbon capture tax credit and an extension of the nuclear tax credit. Currently, there is only one nuclear project under construction in the United States, the Vogtle Nuclear Project in Georgia.

One thing’s for sure, despite the passage of the tax overhaul, the current tax bonanza is far from over.

 

 

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