Existing Finance Policies:
- Production Tax Credit (PTC): The PTC is a per-kilowatt-hour federal tax credit paid over a ten year period for electricity produced from renewable energy resources. The PTC was extended in the American Tax Relief Act through December 31, 2013. The legislation includes language that allows all renewable energy projects eligible for the PTC that “start construction,” as opposed to being “in service,” in 2013 to claim the credit. The measure also extends the option to claim the investment tax credit (ITC) in lieu of the PTC.
- Investment Tax Credit (ITC): The ITC is a federal tax credit for the capital investment in a renewable energy facility that is paid upfront on the day the facility is placed in service. The ITC is set to expire December 31, 2016.
- Department of Energy (DOE) Loan Guarantee Program (LGP): Through the LGP, DOE guarantees 80% of a loan for renewable energy projects and covers the corresponding credit subsidy costs. In the 2011 Continuing Resolution, Congress gave DOE $1.183 in loan guarantee authority for renewable energy and energy efficiency projects. Congress also appropriated $170 million to cover the credit subsidy costs of these projects.
- Feed-in Tariff (FIT): Under a FIT, utilities guarantee payment to renewable energy producers at a fixed price for the electricity produced over a fixed period of time. The cost is allocated among electric consumers. A handful of states have implemented a FIT but are limited by federal law to setting rates at avoided costs, which in some cases is not high enough to foster renewable energy development.
Expired Finance Policies
- 1603 Treasury Grant: The 1603 Grant allowed project developers eligible for the ITC or PTC to elect to obtain an equivalent grant from the Treasury Department. To be eligible, facilities were required to begin construction by December 31, 2011, and must be placed in service by the expiration dates of the PTC or ITC.
- Volumetric Ethanol Excise Tax Credit (VEETC) Blenders Credit: The ethanol Blenders Credit of 45 cents per gallon was claimed by oil companies that blend ethanol into gasoline. The credit expired on December 31, 2011.
- Biodiesel Mixture Credit Blenders Credit: The biodiesel Blenders Credit of 50 cents or $1.00 per gallon (depending on the type of biodiesel) was claimed by diesel fuel companies that blend biodiesel into traditional diesel fuel. The credit expired on December 31, 2011.
- Clean Renewable Energy Bonds (CREBs): CREBs are a type of bond where the investor receives a tax credit from the Treasury Department instead of an interest payment from the bond issuer. The federal CREBs program received over $2.4 billion in Congressional appropriations in February 2009, but has not been extended since then.
Potential Finance Policies
- Clean Energy Deployment Administration (CEDA): CEDA would administer various types of credit instruments to help breakthrough clean energy technologies get from the proven pilot phase to commercialization. This commercialization gap, or valley of death, is too capital intensive for venture capital but too risky for private equity and debt financing.
- Renewable Energy Standard Offer (RESO) Contracts and Rates: This Americanized version of the feed-in tariff (FIT) allows states to adapt the best of this internationally successful policy to the US regulator system and set rates for renewable energy technology above avoided costs without any changes to federal laws.
- Master Limited Partnerships (MLPs): MLPs are a well established mechanism in the oil and gas sectors for the organization of tax-advantaged pass-through entities in infrastructure finance. Shareholders (Partners) can lower their own tax liability by reporting a percentage of the depreciation for property the MLP owns. Current rules prevent renewable energy projects from utilizing MLPs.
- Real Estate Investment Trusts (REITs): Real Estate Investment Trusts (REITs) are traded companies with portfolios of properties earning passive income, like rent or interest. REITs must remit at least 90% of their income as dividends, and are not subject to a corporate tax if they remit 100%. Individual shareholders pay income taxes on dividends and gains from selling stock. Current rules prevent REITs from owning and operating renewable energy for their own benefit.
- Reverse Auctions: Reverse Auctions operate through a funded authority that tenders competitive bids for developers to submit renewable energy projects. Developers must estimate the cost of their projects and offer a bid high enough to generate a profit yet low enough to beat out competitors.