A recent hearing in the Senate Finance Committee titled, “Clean Energy: From the Margins to the Mainstream,” featured His Excellency John Bruton, Ambassador, European Commission Delegation; John Krenicki, President and Chief Executive Officer, General Electric Energy; Todd Raba, President, MidAmerican Energy Company (MEO), Des Moines, IA; Johan van’t Hof, Chief Executive Officer, Tonbridge Corporation, Toronto, Ontario, Canada; and Dr. Ryan H. Wiser, Scientist, Lawrence Berkeley National Laboratory, Berkeley, California.
Addressing geothermal, Raba said:
With regard to geothermal, hydro, biomass and waste-to-energy generation…these resources are more geographically limited than wind; they function as dispatchable, baseload resources, enhancing their value. Drilling new geothermal wells or upgrading existing hydro facilities to create incremental power expansions is highly capital intensive. The vast majority of these projects cannot be completed within the short placed-in-service time frames under the existing PTC legislation, thus severely limiting new investments.
MidAmerican has suggested that Congress consider allowing flexibility with regard to placed-in-service dates for projects involving baseload renewables. We believe this could be done at little budget cost if the law allows projects under construction and with output contracts in place to opt in to tax treatment that reduce the ten-year application of the PTC by a length of time equivalent to the period between date of expiration of the placed-in-service date and the completion of the project. In other words, if a project was brought on line six months after the expiration of the placed-in-service date, it could choose to receive the tax credit for only nine and on-half years instead of ten.
The better answer, though, would be a five- or ten-year extension of the PTC that would provide long-term certainty to utilities, independent project developers and manufacturers while solving the base load renewable issue.
The speakers, who focused predominantly upon wind energy, agreed across the board that a ten year extension of the production tax credit would be one of the best actions Congress could take to ensure continued renewable development. Several speakers suggested coupling the PTC with a renewable portfolio standard.
The committee responded favorably to the proposed enhancements of the PTC, both in terms of a placed in service change and also an extension of the credit. Chairman Baucus said that renewables are “more important now than they were when we last extended the credit,” Some industry insiders expect a stand-alone energy tax bill to come out of the finance committee this summer.
When Senator Baucus asked about “scaling down” the tax credit over time in order to reduce the cost to the treasury, speakers generally agreed that such action would be reasonable if a tax credit was allocated over a ten year timeframe, rather than the usual one to two year extensions. Wiser cautioned that the costs of wind energy have increased in the past four years (largely due to increases in the price of wind turbines), and so Congress should not scale down too quickly. Long term, stable policy emerged often as the most pressing need for renewable energy producers.
Transmission issues were also discussed at length, with van’t Hof speaking almost exclusively about the difficulties surrounding renewables and transmission. According to van’t Hof, the need for transmission, specifically related to renewables, is continuing to grow. Raba said the following about transmission:
Combining the remote location of most of our renewable potential with the potential with the diffuse nature of these resources, transmission becomes a disproportionately larger component of the retail cost compared to conventional resources. This situation will only grow more pronounced as we increase the amount of renewable generation, because the most cost-effective locations have already been developed.
Burton, who opened the hearing, spoke about the example some EU countries have set of using taxation to reach renewable energy goals. “Polluters must pay,” Burton said. He expressed “concern” about the growing use of coal energy around the world, and discussed the importance of sequestration activities, which, he noted, are still in the early research stage both in Europe and in America. When pressed about the “one message about renewables” he’d like to leave with Congress, he cited renewables as a “vital” part of any system dealing with electricity needs and climate change. Renewables are a necessary part, but not the only part, he said.
See Hearing Website
