The GOP tax plan looks like it could pass out of the Senate, a prospect that has green energy companies scrambling to save their tax subsidies.
The Senate tax plan, which moved to a formal debate Wednesday, would make it harder for green energy companies to exchange their tax subsidies for financing. “Without tax equity financing, most of these projects don’t go forward, solar or wind,” an unnamed green energy lobbyist told Politico.
Wind energy lobbyists are working with senators to try and get the provision changed. American Wind Energy Association Peter Kelley said they want tax reform that “does not threaten the $85 billion in economic activity and the projected 50,000 new American jobs from wind farm development through 2020.”
News outlets often parrot reports claiming that wind and solar energy are outcompeting more conventional sources, like coal and natural gas. However, tax benefits are a major reason why banks finance wind and solar farms. So-called tax equity financing allow green energy companies to leverage tax benefits in exchange for financing. Financiers then get cash from the government. Green energy companies often don’t make enough money to take advantage of tax credits, so they use them as leverage for financing.
These tax equity deals make up as much as 60 percent of a wind farm’s capital cost, and about half the cost of a solar project, Politico noted.
Wind and solar tax credits are quite generous. The wind production tax credit allows turbine owners to collect $23 per megawatt hour for 10 years. Solar panel owners can get a credit worth up to 30 percent of the project’s cost.
Without generous tax incentives, banks are less likely to finance green energy projects.
“It takes us out of the market,” a green energy financing source told Politico. “The best case scenario is it significantly reduces our involvement in the market, but it would be so difficult to plan in the near term at least, it would take us out. And we’re talking about hundreds of millions of dollars of investment every year.”
The House version of the GOP tax plan also takes aim at green energy tax subsidies, reducing the production and investment credits for wind and solar projects.
Changes made to green energy production tax credits would save taxpayers $12.3 billion over 10 years, according to the bill’s cost estimate. Payments for green energy generation fall from 2.3 to 1.5 cents per kilowatt hour and it more narrowly defines when a project can qualify.
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