Solar and Wind Power Held Hostage ”“ Again

Congress has repeatedly failed to extend the tax credits for renewable energy, which expire at the end of this year. The gridlock is discouraging investment in renewables and jeopardizing major solar and wind projects throughout the country.

Anyone who didn’t TiVo-zap the television ads during the recent Olympics knows one thing for sure: Solar, wind, and biofuels enjoy robust bipartisan support. This was the core message of every Obama ad. It was also the core message of every McCain ad, except the one attacking Obama for being popular.

Nevertheless, Congress has repeatedly failed to extend the tax credits that are essential if America is to remain in the renewable energy business. Germany, Spain, Italy, South Korea, Greece, Australia, and many other countries all provide more generous incentives than we do. Bulgaria provides more support for renewable energy than we do. Yet we are on the verge of discontinuing even that modest support.

T. Boone Pickens has made clear that his multibillion-dollar wind power plans are contingent on the wind tax credits being renewed. Pacific Gas and Electric has contracted to build two solar photovoltaic facilities in California totaling 800 megawatts (about as much as now exists throughout the entire nation), but its plans are contingent on the solar tax credits being renewed.

Across the country, companies that have secured financing are racing hard to complete their projects before the credits expire in December. Companies that have not yet secured financing are being forced to shelve their projects because banks won’t finance them until the tax credits are in place.

According to the American Wind Energy Association, when the credits were allowed to lapse in the past (most recently in 1999, 2001, and 2003), investments in wind projects fell by 70 percent to 93 percent. That is no way to build an industry.

An independent study by Navigant Consulting found that “112,000 jobs in the wind and solar industries (78,000 wind, 34,000 solar) and $19 billion in investment” are at risk if the renewable energy tax credits are allowed to expire at the end of the year.

The House of Representatives (which does not have a filibuster) has passed an extension of the renewable tax credits, but in a form that Republicans in the Senate (which does have a filibuster) don’t like. The measure has come before the Senate eight times but could never command the 60 votes needed to end a filibuster. John McCain didn’t vote for the measure on any of those eight occasions, even when he was nearby during the vote, sitting in his Senate office. (Barack Obama managed to vote for the legislation three times, although, like McCain, he was pretty busy.)

At one level, this has nothing to do with renewable energy.

During the 2006 campaign, Democrats pledged to not pass any measures that would reduce revenues or create new monetary obligations unless they identified money to pay for them somewhere else. House Democrats proposed to pay for the renewable energy credits by reducing some tax breaks for oil companies.

Substantively, the Democrats’ arguments were that, (a) after operating for a century and a half, the oil industry is sufficiently mature not to need so many subsidies; and (b) after making the highest net profits in history ($130 million in profits every day for Exxon), the oil industry is rich enough not to need so many subsidies.

Politically, the Democrats knew that the Republican leaders were so in the pocket of the oil industry that they would balk — and the Republicans could then be blamed in the election for scuttling the solar and wind subsidies.

Balk the Republicans did — eight times — placing America’s energy future in real peril as both sides played chicken.

There could have been another outcome. Rep. Roscoe Bartlett, an energy-savvy Republican from Maryland, proposed a bill (H.R. 5984) that would have simply extended the tax credits for renewable energy and efficiency for one year. The bill had 75 bipartisan co-sponsors and would likely have passed with only token resistance. However, the House Democratic leadership refused to let it out of committee. An identical bill (S. 2821) was introduced in the Senate by Democrat Maria Cantwell and Republican John Ensign with 43 co-sponsors. The measure was included as an amendment to the Foreclosure Prevention Act of 2008, which the Senate approved by a vote of 88-8.

Had the House merely passed an identical bill, the renewable energy tax credits would have been extended for one year. They then could have been reconsidered for a much longer extension next year with no election on the horizon to turn them into a political football. The House’s failure to seize that opportunity was a huge mistake.

With high gasoline prices, Congress is now under enormous pressure to “do something” on energy. As a result, we are likely to see the sort of pressure-cooker legislation that everyone later looks back on with embarrassment.

“We are likely to see the sort of pressure-cooker legislation on energy that everyone later looks back on with embarrassment.”
In the House of Representatives, 11 Republicans and 11 Democrats (joined now by 97 additional representatives) have introduced the “National Conservation, Environment and Energy Independence Act.” This little gem removes many of the most crucial federal restrictions on oil drilling on the Outer Continental Shelf. It taps the Strategic Petroleum Reserve (in the apparent belief that gasoline prices that discourage SUVs constitute a state of emergency). It ends the moratorium on oil-shale leasing, rekindling wars with ranchers and water users in the West. Almost as an afterthought, it extends the renewable energy tax credits for six years.

In the Senate, a bipartisan “gang of 10” conservatives has proposed a New Energy Reform Act (with the catchy though misleading acronym New ERA). The measure includes a couple of McCain’s pillars: offshore leasing off some East Coast and Gulf states, with a requirement (in violation of World Trade Organization rules) that all the oil remain in the United States, as well as providing accelerated depreciation for new nuclear plants. It also includes one of Obama’s goals — large subsidies to Detroit for a new generation of post-petroleum automobiles. The measure’s backers hope to buy some coal-state votes with grants for coal-to-liquid plants with “carbon-capture capability.” And, as a sweetener for those favoring a sane energy future and a measure that actually accomplishes something, it contains a five-year extension of tax credits for efficiency and renewables, paid for in part by royalties from the new oil drilling.

Barack Obama and House Speaker Nancy Pelosi — alarmed by the pending collapse of the renewable energy industry and the public outcry over gasoline — have indicated a willingness to consider this “compromise.”

But John McCain has rejected it outright, as have many congressional Republicans under siege from Rush Limbaugh’s dittoheads. The Republicans believe that an undiluted bill requiring oil drilling is a political winner for them. They don’t think the Democrats will dare to vote against a “just drill here; just drill now” bill. The Republican leadership doesn’t want to dilute its message.

After the “gasoline tax holiday” he proposed last spring was greeted with widespread derision, John McCain made a stunning flip-flop on his long-held opposition to drilling for oil in protected offshore waters. He shifted to making it the new centerpiece of his presidential campaign. That gambit is working much better than the tax holiday, although it is similarly irrelevant in the real world.

When asked in a Rasmussen survey, “Do you favor offshore drilling to bring down gasoline prices?” nearly two-thirds of Americans answered “yes.” (Alas, no one has asked “Would you favor offshore drilling in protected waters if you knew that it would not bring down gasoline prices?”)

Having read the polls, McCain proposes to give the oil industry what Senate Majority Leader Harry Reid colorfully calls “a big wet kiss.” The Straight Talk Express got derailed into a purely political posture that, after the election, will have the same swift descent into irrelevance as Quemoy and Matsu.

American oil peaked 40 years ago and has been declining ever since. If we want to wean ourselves of our oil addiction while addressing global warming, drilling for just a wee bit more oil is a strange centerpiece for a national energy policy. Even high-end estimates of the amount of new offshore oil produced would be of negligible importance in the world oil market where prices are set.

Offshore drilling does serve the interests of some oil companies. But in terms of national energy policy — as John McCain knows full well — it is roughly as useful as banning gasoline lawn mowers.

Ultimately, the renewable energy tax credits will be extended. And sooner or later, a wide variety of other measures will be adopted to speed investments in hyper-efficiency and renewable energy. If the credits are not extended by the end of this year, most observers expect them to be extended retroactively early in the next legislative session.

Yet the failure to extend the tax credits is already causing significant disruptions as companies begin to revise their plans and explore options elsewhere. Banks cannot prudently finance projects based on expectations of future legislation. Such gaps in the assured availability of credits are extremely difficult for companies, and they are much more difficult for workers, and for those we expect will train the huge workforce needed for a swift transition.
“The failure to extend the tax credits is causing significant disruptions as companies revise their plans and explore options elsewhere.”
The proper response is to drop the “Christmas tree” legislation. There is no urgent reason to fast track a proposal for liquids from coal and subsidies for nuclear power, oil shale, tar sands, and Detroit. None of those industries will sunset on Dec. 31 without an extension of their existing tax treatment.

In any sane world, our Congress would be able to simply extend for 10 years the existing tax credits for energy sources that produce no greenhouse gases, no bomb-grade materials, no toxic wastes, no negative balance of trade. But the last year has shown sanity to be impossible in our dueling democracy. So Congress should accept the bipartisan wisdom of Sens. Maria Cantwell and John Ensign and pass a one-year extension of all the tax credits for efficiency and renewables and then sort out the long-term policy after the election. If there needs to be some additional drilling, ideally in the Gulf Coast, in order to make this deal fly, we greens should grit our teeth and accept it.

This matters because most of the industrial world has been grappling with global warming for the last decade while the largest emitter of greenhouse gases has worked to sabotage their efforts. There is genuine grassroots anger at the United States throughout much of the world, and each additional indication that this is a trivial matter for us stokes that anger.

Assuring the credits also matters because inventors, small companies, venture capitalists, large companies, universities and colleges, and tens of thousands of workers have bet heavily that efficiency and renewable energy will play a vital role in our nation’s future. They deserve a lot more respect than our political leaders are giving them.