Saturday, May 14, 2011

What does renewable energy need?

Energy policy makes strange bedfellows. President Obama calls for getting rid of government subsidies for the oil industry but turns around to call for more domestic production.

At least some members of the renewable energy community don't support proposals to eliminate federal subsidies or tax breaks on domestic oil production. They worry that approach is a slippery slope that could impact taxes on all types of energy production. Instead, they call for similar long-term tax credits for renewable energy.

At the Geothermal Energy Association's Geothermal Energy Forum & International Forum in DC on May 4, panelist Jonathan Weisgall of Mid-American Energy pointed out that the oil depletion allowance was approved in 1913 and is permanent. Renewable energy in contrast, gets only short, temporary provisions that typically expire or run up to the time limit before being renewed. This makes planning and investment iffy at best. Weisgall called for long term extension of the Production Tax Credit and a national Renewable Energy Standard, among other incentives, for renewable energy in order to give it a level playing field and to promote all domestic energy sources. [right, geothermal map of North America. By Dave Blackwell at SMU, published by AAPG]

Interestingly, he observed that in 2009-10, not a single coal-fired power plant began construction. For Mid-America it's because they cannot make the case to state regulators that a pulverized coal plant will be the best cost source of electricity over the next 40 years.

The rapid increase in natural gas supplies in the U.S. from shale units, and the rise of renewables that don't have the same environmental costs that coal has, are changing the marketplace.



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    Renewable Energy Credit is one of two main outputs or benefits from generation of new power from renewable sources. Renewable power generation creates actual power in the form of electricity, and environmental benefits to society from “green” power production – such as minimizing pollution and slowing the rate finite fuel resources are used. The actual power is sold into the local grid, and the societal benefits are sold in the form of Renewable Energy Credits or “RECs”, sold separately as a commodity into the marketplace. While RECs are not actually a measure of power, each REC represents one megawatt hour (MWh) of renewable-generated energy. For each REC purchased the customer is able to claim the equivalent MWh of energy reduction as on offset to their conventional energy use.
    Let’s assume a yearly production of 200,000,000 kWh of electricity from our biomass plant. Please reference the Biomass section for how this value was calculated. Using the 2010 PTC rate of $0.022 per kWh would result in a tax credit of $4,400,000.

  2. Hi there! great stuff here, I'm glad that I drop by your page and found this very interesting. Thanks for posting about renewable energy tax credits. Hoping to read something like this in the future! Keep it up!

    The Investment Tax Credit (ITC) was originally part of the Revenue Act of 1962. In subsequent legislation the ITC was modified to include incentives for renewable energy property. Currently, taxpayers can choose to use the ITC in lieu of the PTC for eligible property. To be considered eligible, most renewable source property must be placed in service by December 31, 2013. However, solar and geothermal property can be eligible if placed in service by December 31, 2016.