Solar Renewable Energy Credit
Solar Renewable Energy Credit – UPDATE: Legislation includes a plan to invest in energy research and development and important expansions of tax credits for renewable energy, but no provisions on “direct payments.”
Green technology reporter with a particular focus on smart grid, demand response, energy storage, renewable energy and technology to integrate distributed, intermittent green energy into the grid.
Solar Renewable Energy Credit
Extensions of tax credits to fund research and development in solar, wind and clean energy have passed both houses of Congress.
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The US Congress on Monday passed a massive spending bill that would provide $35 billion for energy research and development programs, a two-year extension of the solar investment tax credit, a one-year extension of the production tax credit for wind projects, and an extension to 2025 for offshore wind tax credits – a significant last-minute boost for the clean energy industry.
That provision for clean energy is included in a $1.4 trillion federal spending and tax package agreed to by congressional leaders over the weekend, along with a $900 billion coronavirus relief package. Summaries of the energy provisions included in the bill were provided by the office of Senate Minority Leader Charles Schumer (D-New York), and Schumer and House Speaker Nancy Pelosi (D-Calif.) highlighted this in Sunday’s summary of the bill.
Congress is under pressure to pass both bills on Monday to ensure continued federal government funding and complete a politically urgent extension of the coronavirus relief measures passed in March. UPDATE: The final version of the bill passed the House and Senate on Monday night.
The act’s funding for energy research, development, demonstration (RD&D) and commercialization is the first major energy law passed in a decade. Although the Biden-Harris administration’s carbon reduction target is not a mandate, it allocates billions of dollars over the next five years to technological improvements in solar and wind power, energy storage, geothermal power, ocean power, grid modernization, energy efficiency and. .. Supporting nuclear power Energy and CO2 capture, utilization and storage.
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This R&D spending will have a limited impact on renewable energy growth in the short term. But the tax credit extensions included in the bill would give the primary state’s wind and solar incentive structure a significant boost by extending the expiration date set by Congress late last year.
The expansions will be a welcome relief for the renewable energy industries, which have been stressed by economic disruptions linked to the coronavirus that threaten to delay projects and erode their value. They could also put the industry in a better position to seek further federal policy support when President-elect Joe Biden takes office and seeks to implement ambitious decarbonization targets for the U.S. energy sector, said Ravi Manghani, head of solar research at Wood Mackenzie. .
The solar and wind industries were unable to reach the “direct payment” arrangement they wanted, which would have allowed the tax credits to be converted into direct payments from the federal government, rather than being claimed by investors who wanted to offset a tax liability. Developers in this space fear that the impact of the coronavirus pandemic on the economy will reduce demand for tax share investments, as banks and financial institutions will have less appetite for loans to offset tax liabilities in a year of weaker earnings.
According to a summary of Sen. Schumer’s office said the two-year extension of the federal investment tax credit for solar projects would maintain the current 26 percent credit for projects that begin construction by the end of 2022, rather than expiring at the end of 2020, as would be the case under current legislation. The ITC will drop to 22 percent for projects that begin construction by the end of 2023, then to 10 percent for large solar projects and zero percent for small solar projects in 2024.
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Many large solar developments slated for completion by 2023 used “safe harbor” provisions to secure the original 30 percent ITC loan, eliminating the risk of project financing being disrupted by tax credit reductions, Manghani noted.
But the two-year extension is “a much better result than the industry expected,” Manghani said. This will provide a significant benefit to solar growth from 2022 to 2025, as more projects can secure 26 percent and 22 percent loans through “start-up” or “safe harbor” provisions through 2023.
In addition, the bill “gives the industry a full extra year to negotiate long-term tax credits or tie renewables directly to future carbon policies with a friendly Biden administration,” Manghani noted. Utility solar is already cost competitive with coal power worldwide and with natural gas power in many markets.
The lack of a provision for direct payment “could be somewhat disappointing for smaller solar developer companies that have struggled to secure tax capital in the [economic contraction] caused by the pandemic,” Manghani acknowledged. But he added: “Overall, the industry would view this result as three-quarters full.”
Recs, Which Put The
Wind energy also benefits from the tax extension provided for in the draft law. The production tax credit for wind projects, usually claimed by onshore developers, will remain at 60 percent for projects that begin construction by the end of 2021, rather than being reduced to 40 percent as required by the previous law. Without future legislative changes, the PTC will drop to zero by 2022.
Action by the U.S. Treasury Department earlier this year extended safe harbor regulations for another year to accommodate project delays related to the coronavirus, providing relief for projects struggling with supply chain disruptions and delays and enabling building permits.
As a result of the expansion of the ITC, offshore wind farms also receive significant tax relief, which can be used to finance wind farm projects instead of the PTC. Under previous law, any wind project that wanted to use this ITC option would have been phased out completely over the next two years when the PTC expired.
But the ITC’s new rules will allow offshore wind projects to retain access to the full 30 percent credit for projects that begin construction by 2025. This is a major new boost to the estimated 28 gigawatts of offshore wind projects planned on the US East Coast by 2030. Some of them have been forced to delay completion dates due to delays in federal approvals, which could jeopardize access to higher tax breaks.
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“State governments and utility ratepayers will be able to benefit from lower delivered energy costs as a result of the extension,” Dan Shreve, director of global wind research at WoodMac, said in an email. “More countries should be encouraged to join those that have adopted ambitious offshore wind mandates to support the decarbonisation of their energy grids.” The expansion will also help provide certainty for the development of offshore wind turbines and port facilities, he said.
Senator Schumer’s office also shared details of the Energy Act of 2000, a massive funding package for energy research and development that was rolled into a broader spending package last week. The bill includes about $35 billion in funding over the next five years through Department of Energy programs, through a collection of programs drawn largely from the 555-page Senate Energy Bill introduced this spring by Senator Lisa Murkowski (R-Alaska) and Sen. Joe was approved. Manchin (D-West Virginia). , as well as the accompanying energy bill that the House passed this spring.
Solar Energy will receive $1.5 billion for programs to improve the energy efficiency and cost-effectiveness of solar PV, increase production and recycling of solar panels, and better integrate solar into the grid. Wind energy will receive $625 million in funding for materials and design research, improvements in manufacturing and delivery efficiency, and technology to integrate wind energy at the transmission and distribution grid levels. Geothermal energy research receives US$850 million, hydroelectric power and ocean energy receive US$933 million.
In addition to those R&D funds, the bill would direct the Interior Department to set a target of at least 25 gigawatts of solar, wind and geothermal generation on public land by 2025, the summary said. The Biden administration intends to streamline permits and lower costs for renewable energy development on public lands, as well as reverse a Trump administration policy that allowed extensive oil and gas drilling on public lands.
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Energy Storage will receive $1.08 billion over five years to research and commercialize a range of technologies needed to integrate intermittent renewable energy into the grid. Targets include distributed batteries and multi-hour control systems to manage their interaction with the grid, as well as long-term storage technologies such as pumped storage power plants and compressed air storage.
An additional $2.36 billion over five years will go toward a range of grid modernization efforts, from integrating renewable energy sources, batteries and electric vehicles to modeling grid architectures to drive technology standards and control platforms to manage these assets. The funding will also support investments in cybersecurity, a critical issue given recent news of Russian hacking of IT systems at the DOE and the Federal Energy Regulatory Commission, as well as U.S. utilities and energy companies.
Carbon capture, use and storage is targeted with $6.2 billion to reduce emissions from power plants and $477 million to support research into technologies to capture carbon dioxide from the air. Another $500 million will fund research to reduce carbon emissions for industrial sectors that are difficult to decarbonize, such as steel and cement production, and transport sectors such as shipping and aviation.
Nuclear Energy will receive $6.6 billion to upgrade nuclear power plants and develop advanced reactor designs, and $4.7 billion will be used to fund basic and applied nuclear fusion research.
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