Incentives Needed to Finance Renewable Energy Projects

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In a statement submitted for the record of the House Ways and Means Committee April 23rd hearing entitled “Energy Tax Incentives Driving the Green Jobs Economy,” the American Public Power Association reiterated its support for the Committee’s work to develop legislation that provides benefits and opportunities for public power to receive comparable incentives for renewable energy projects so public power can maintain its lead in developing these projects in a timely fashion, contribute to the creation of clean energy jobs, and protect the economy and the environment.

“Since public power utilities operate on a not-for-profit basis and incur no federal income tax liability, traditional production tax credits otherwise available to for-profit utilities simply do not work—because there is no federal tax liability to offset with the credit,” APPA said. Yet, these utilities are ideally situated from a geographic and size standpoint to integrate clean and renewable technologies into their systems. Comparable incentives would enable public power systems to finance billions of dollars in projects now awaiting these incentives and to meet state renewable energy mandates already in place.

In the testimony, APPA pointed to the Clean Renewable Energy Bonds (CREB) program as one vehicle that could provide those comparable incentives over the long term. However, APPA said the program lacks enough funding to meet the thousands of clean energy projects public power already has in the pipeline.

“In the last round of funding, $800 million was made available to public power utilities and the program was oversubscribed—much more funding was requested than was available. Public power utilities have billions of dollars in projects awaiting these incentives—with some even having the potential to use $800 million for a single project if given the opportunity.”

APPA therefore is requesting that the CREBS allocation program be uncapped and has indicated its strong support for legislation due to be introduced by Representative James McDermott (D-WA) which would do just
that. If the cap was lifted, APPA testified, “our members would no longer have to go through the application process…and could apply for CREBs knowing that the entire project could be financed using one mechanism.”

Failing the passage of legislation to uncap the CREBs program, APPA testified that another vehicle could also be used to provide comparable incentives to public power utilities, though on a short-term basis. The American Recovery and Reinvestment Act of 2009 Section 1603 provides a 30 percent grant to renewable projects in lieu of the production tax credit. Though public power systems are not currently eligible to receive the grant directly, if the program were expanded to allow direct access, the funds would be spent only on financing renewables. This would result in a better value to the federal government, which would
then be spending more money financing renewable energy generation than helping private developers profit from purchase power agreements public power systems engage in to indirectly benefit from the grant.

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