A new government watchdog report found that the Internal Revenue service has handed out billions of dollars to support green energy projects, and then failed to mention how the money was spent on building new power generation.
The Government Accountability Office (GAO) reports that IRS tax subsidies to green energy operators “accounted for an estimated $13.7 billion in forgone revenue to the federal government for renewable projects and $1.4 billion for traditional projects” between 2004 and 2013.
That’s a lot of money, but the IRS can’t (or won’t) tell government auditors how much green energy generating capacity their tax subsidies are supporting. The GAO says the IRS “is not required to collect project level data from all taxpayers” who claim an Investment Tax Credit (ITC) or Production Tax Credit (PTC).
“IRS officials stated that IRS is unlikely to collect additional data on these tax credits unless it is directed to do so,” the GAO reported. “Since 1994, GAO has encouraged greater scrutiny of tax expenditures, including data collection. Without project-level data on the ITC and PTC, Congress cannot evaluate their effectiveness as it considers whether to reauthorize or extend them.”
IRS tax subsidies to green energy producers, particularly wind and solar, have caused a major political battle in Congress. For years, many Republicans and a few Democrats have pushed to end the Wind Production Tax Credit, arguing wind power should be able to stand on its own.
The Wind PTC was allowed to expire at the end of last year, but lawmakers are continually trying to re-up the tax credit. The wind industry lobby has even said it would support a temporary wind tax credit. But Republicans’ latest proposal to completely get rid of wind tax credits may have some legs.
Tennessee Sen. Lamar Alexander recently proposed using revenues saved by ending wind tax credits to increase funding in basic energy research at the Energy Department.
“The most conspicuous example of this addiction is the wasteful wind subsidy – which costs taxpayers about $6 billion every year we extend it, enough to double basic energy research at the Department of Energy,” Alexander said in a March hearing.
“There is a place for limited, short-term subsidies to jumpstart new technologies, but it is long past time for wind to stand on its own in the marketplace,” he added.
GAO’s report on green energy subsidies also noted that federal agencies have spent billions of more dollars trying to get wind, solar and other forms of energy off the ground — everyone remembers Solyndra. These billions have been spent in addition to state green energy mandates and price supports.
GAO also noted that if green tax credits were reduced or eliminated “fewer projects would likely be built.” The watchdog’s data “suggests that reducing the ITC or eliminating the PTC would likely reduce the number of renewable projects built because developers’ returns would decline unless [power purchase agreement] prices increased to compensate for the reduction in federal support.”
Many states have laws preventing their green energy mandates from raising prices too much, but even so, GAO estimates that ending green tax credits could raise electricity prices anywhere from 20 to 62 percent depending on how much each developer needs to increase their prices to compensate for the lost federal support.
“Specifically, for the solar project with the lower ITC, we found that the electricity prices in PPAs would need to increase by 20 to 27 percent if developers were to maintain their returns,” GAO said. “For wind projects without the PTC, we found that electricity prices would need to increase by 32 to 62 percent if developers were to maintain their returns.”
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