Production Tax Credit for Wind Set to Expire, Extension Could Support Renewable Energy’s Transition to Substantial Growth

Ian Britton 2001.
Ian Britton 2001.
The federal renewable energy production tax credit (PTC) offers tax relief on a per-kilowatt-hour basis to producers of electricity generated by qualified renewable sources. It was introduced as a part of the Energy Policy Act of 1992 in an effort to foster growth in clean energy markets. The credit has been largely utilized by the wind industry, resulting in substantial growth over the past 2 decades. Congress has allowed the credit to expire four times and has extended the timeline five times, with the most recent extension passed earlier this year. The credit is poised to expire at the end of 2013 again. In light of all the PTC has enabled the wind industry to accomplish, the uncertainty surrounding its extension drags companies even further into the cycle of boom-and-bust that mirrors the frequent expirations and renewals. A current proposal to extend the PTC for a ten year period is estimated to cost $24.7 billion, and windmakers assert that such an extension, paired with a strategic phase-out toward the end, will give the industry the time it needs to continue to grow at a sustainable level, without the help of further subsidies. At a fraction of the cost of subsidies given to the fossil fuel industry, the long-term public health, environmental, and social benefits of an energy infrastructure that doesn’t produce massive concentrations greenhouse gases such as CO2 far outweigh the cost of extending the production tax credit for wind.

The PTC provides a 2.2-cent/kWh credit for the first ten years of a renewable energy facility’s operation. Eligible companies include wind, geothermal, and closed-loop biomass (crops grown specifically for energy production). Open-loop biomass (forestry and industrial waste), efficiency and capacity upgrades for existing hydroelectric facilities, landfill gas, municipal solid waste, and other technologies receive a 1.1-cent/kWh credit under the PTC’s provisions. If a company wants to receive the benefits of the credit on a new project, significant work and/or investment must have commenced by December 31, 2013. This deadline has many wind producers scrambling to get their projects underway, and just as many turning away from their projects, averse to the financial risk of not receiving the funding necessary to proceed.

PTC-Graph UCSUSAIf there’s one thing we know, it’s that the production tax credit has a positive effect on clean energy industries. According to a recent press release, LM Wind Power, a major supplier of turbine blades, has doubled its US workforce in the time period between April and August, from 350 to 700 employees. LM projects its employment will reach 1,200 in the US in 2014. And the jobs created by the wind industry are good, reliable jobs. Wind turbines are massive pieces of equipment, requiring many unique parts. Because of the complexity of the manufacturing process, and the actual size of the pieces, the United States has a competitive advantage for producing turbine parts domestically. In addition to securing work for thousands of Americans, extending the PTC will ultimately reduce greenhouse gas emissions and our dependence on fossil fuels.

While extending the production tax credit has clear benefits for wind and other clean energy industries, there is still much opposition to the measure. Opponents claim that electricity generated by turbines is inefficient because the wind blows intermittently, and a background source of power is required to compensate for calm days. And in most cases, this background power comes from fossil fuel sources. This shouldn’t serve as a reason to let the credit expire, however. If wind continues to receive the assistance it needs to thrive, future investment in clean energy technologies like solar, hydropower, and battery and storage technologies to provide background electricity for turbines seems highly likely. The long term public health, environmental, and social benefits of an energy infrastructure that does not emit carbon dioxide and other greenhouse gases at a high level far outweigh the short-term costs of giving windmakers the help they need to stand on their own two feet.

The PTC is only offered to companies that meet clear, performance-based standards. The credit has allowed 550 wind facilities to open and operate within the United States. It provides strong incentives for growth amongst wind producers, and its constant expiration and renewal leaves investors wary and uncertain about the future of wind power. Industry experts recommend phasing out the credit over the next ten years, and introducing mechanisms such as Master Limited Partnerships (MLPs) and Real Estate Investment Trusts (REITs), which will give wind companies tax structures similar to those of fossil fuel companies, who collect billions of dollars in profit each year. Green America strongly urges policy makers to extend the production tax credit so that wind power and other clean energy technologies can develop more rapidly – the time has never been more urgent.

A provision to extend the PTC for ten years is included in the Clean Energy Victory Bonds Act, which would provide funding on a national scale for clean energy development.

A summary of the production tax credit’s history can be found here.

This blog posting was written by Sam Catherman, Green America’s Climate Action Program Intern.


Can Crowd Funding Kickstart Clean Energy?

Solar PowerCrowd funding refers to the collective contributions of many individuals to fund a larger effort by other people or organizations. Internet platforms like Kickstarter are the most common vehicles for collecting donations for projects, but recent legislation may begin a shift to a new method of actual financing, where investors can potentially see a return on investment. The JOBS Act of 2012 removed several limiting regulations from the Securities Act of 1933, which would allow average Americans to invest directly in small business.  This increased access to financing would allow small businesses more freedom to grow and achieve their goals. For example, the JOBS Act included provisions that increased the number of shareholders a company may have before it must register its common stock with the Securities Exchange Commission. It also allowed the use of government-registered funding portals, or websites used to collect investments, on the condition that investments are capped at a level based on the investor’s net worth. These provisions will allow average investors to easily invest in small businesses for the first time, and will offer protections from the risks involved with investing in new companies.

The JOBS Act took a few steps towards freeing up capital for small businesses, but the provisions allowing average investors to get involved won’t be approved until 2014. In the meantime, companies such as Mosaic Inc. have used existing legislation in approved states to finance clean energy projects that have been largely successful. However, until the SEC implements crowdfunding regulations nationwide, it will be difficult for a startup company to sell shares to the general public nationally.

Some states are not waiting for the federal government to act, and have implemented intrastate (state residents funding state businesses) equity crowd funding. Using provisions in the Securities Act of 1933, specifically a federal exemption for intrastate offerings, Kansas and Georgia have both passed initiatives that would allow companies to sell equity to non-accredited investors to a limit of $1000 (KS) and $10,000 (GA) per investor. Companies would be allowed to collect up to $1 million before they would need to formally register their stock, and they would only be permitted to sell shares to investors who were residents of the same state in which the company was registered. They would also be allowed to advertise the fact that they were seeking funds from new investors. In theory, this would allow the public to invest in whatever business they see fit. This would incentivize small business owners to carry on with their ideas, knowing very well that with enough support, access to capital would not be as big of a problem as it is now. The North Carolina state legislature is on the road to pass a similar initiative in the form of its own JOBS Act. It currently sits at the state senate waiting for the next session to begin, where many are confident that it will be passed.

In the first two years of crowd funding in Kansas, only six companies took advantage of the opportunity, and only one company has taken advantage of crowd funding in Georgia.  So what’s keeping ordinary people in Kansas and Georgia from crowdfunding their way to an economy envisioned by local business owners? There are a number of factors that keep this financing tool from really taking off. First, the types of small businesses that could rely heavily on crowd-sourced capital are often the least interesting to investors. The investment caps of $1 million limit the potential for initial revenues, forcing technology and other high-growth industries to seek other sources of capital. And perhaps most importantly, a very small number of people (both business owners and potential investors) actually understand the new regulations and what is allowed under their provisions. Education for small business owners and potential investors alike, as well as platforms that connect businesses with sources of capital, will be necessary to make crowdfunding work at the state and national level.

While achieving a more formal vehicle for non-accredited investors to purchase equity in startup businesses may still lie ahead, the idea of sourcing donation funds from many small contributors is steadily gaining steam. Many projects are funded by online platforms for donations, including software development, political campaigns, art, disaster relief, and small businesses selling a wide range of products.

Globally, crowdfunding has been used successfully to finance some impressive renewable energy projects. A Dutch company Windcentrale recently set a new crowdfunding record, selling €1.3 million worth of shares in the electricity from a Vestas V-80 2MW wind turbine in a matter of 13 hours. In the U.S., Solar Mosaic has created an innovative crowd funding platform that has already raised funds from 2,200 investors in solar installations nationwide.  Solar Mosaic has generated extensive interest from investors nationwide who want to create a clean energy future. This serves as proof that there is a high public demand for renewable energy, and when presented the opportunity to invest in projects that would bring clean power to homes, people won’t think twice about buying shares.

It is the hope of Green America that crowdfunding at the state and federal level can become a vehicle for growth of the renewable energy sector in the United States. Clean, inexpensive, and renewable power is something a large majority of Americans support. Given the opportunity to easily and safely invest in a project that would aid in the shift from a fossil fuel – based economy to a green energy-based one, the general public could play a crucial role in the propagation of wind, solar, and other renewable energy technologies.

This blog posting was written by Sam Catherman, Green America’s Climate Program Intern.

New Report on Global Climate Change, A Rallying Cry for Action

www.freefoto.com, Ian Britton, 2006.
http://www.freefoto.com, Ian Britton, 2006.

Scientists on the Intergovernmental Panel on Climate Change (IPCC) released their fifth assessment report on global climate change dynamics this month. In addition to reaffirming the assertions of the panel’s four previous assessments with greater statistical accuracy, the new report formally embraces a global upper limit for greenhouse gas emissions, past which the earth would experience irreversible changes to its climate. The models used by the panel are complex and a close eye is required while examining the results. Largely based on the averages of many simulations under many different assumptions, the findings of the panel must be critically analyzed against observational data in order to make useful statements and prescribe actions to mitigate the effects of a warming globe.

Here are some statistical highlights from the 900-page report:

  • There is a strong consensus that the complex climate system on our planet is warming. The changes in temperature of the atmosphere and ocean, in the amounts of snow and ice cover, and in the concentrations of greenhouse gases are historically unprecedented.
  • The past three decades have experienced higher temperatures at the surface than any other decade since 1850.
  • The ocean accounts for over 90% of accumulated energy over the past three decades, resulting in a certain increase in upper ocean temperature.
  • Glaciers and ice sheets in Greenland, the Arctic, and Antarctica have consistently lost mass over the past two decades.
  • Over the last century, global average sea level has risen by about 0.19 meters. If emissions and subsequent warming continue at their current pace, the average global sea level may rise as much as a meter by the end of the century.
  • Greenhouse gases carbon dioxide, methane, and nitrous oxide have reached unprecedented levels in the past 800,000 years. CO2 levels have increased 40% since the preindustrial era, and the ocean has absorbed nearly 30%. The high concentration of CO2 in the ocean results in acidification of the water.
  • It can be stated with 95-100% confidence that human activity resulting in the combustion of fossil fuels and the emission of CO2 and other greenhouse gases is responsible for the observed increases in average temperatures.
  • Across a range of scenarios, global average temperature may rise anywhere from 1.5oC to 4oC. The models account for decadal and regional variability, which the panel says explains the differences in average temperature projections from the last report.

To keep the magnitude of the warming below the internationally agreed target of 2o C above pre-industrial levels, the panel estimates that roughly 1 trillion tons of CO2 may be emitted into the atmosphere. At the current pace of emission, that threshold would be reached in 2040. The panel’s report fine-tuned the findings of a culmination of over 20 years of research. United Nations Secretary General Ban Ki-Moon has declared his intention to call a meeting of global leaders in 2014 to discuss an international treaty addressing the problem.

In light of this report, the need for President Obama to honor his stated commitment to lead in developing an international approach to adapting to a changing climate is clearer than ever. Developed nations must be held to a higher degree of accountability than developing nations when allocating costs for mitigation strategies. Investment in energy efficiency and clean energy technologies must increase significantly to offset greenhouse gas emissions while meeting global power demand. Education campaigns are essential to prepare populations for the impacts of drought, heavy rain, and rising sea levels as a result of global warming. This report is only the latest installment in a body of research that confirms human influence on the dynamics of the earth’s climate. It lays the framework necessary to begin tackling one of the largest issues of our time, and it didn’t arrive a moment too soon.

You can view the summary for policy makers or the full report here.

This posting was written by Sam Catherman, Green America’s Climate Program Intern.

New Standards Proposed for Carbon Pollution from New Power Plants

www.freefoto.com
http://www.freefoto.com

On Friday September 20, 2013, the EPA released a new set of standards regarding carbon emissions from newly constructed power plants. Power plants account for about 40 percent of the United States’ carbon emissions, the largest portion of our nation’s carbon footprint. The standards state that no new large natural gas-fired plant may exceed emissions of 1000 lbs CO2 per megawatt hour, no new small natural gas-fired plant may exceed 1100 lbs CO2 per megawatt hour, and no new coal-fired plant may exceed 1100 lbs CO2 per megawatt hour of electricity produced. New coal-fired plants would also have the option to average their emissions across multiple years, for the purpose of flexibility.

Opposition to the new standards remains high from the coal industry, which views the implementation of technologies required to meet these standards as too costly. To bring a modern coal plant’s average emissions down to meet the new limit would require the installation of Carbon Capture and Storage (CCS) technology, which traps CO2 from the unit and sequesters it below the surface of the earth. Industry opponents of the rulemaking cite CCS technology’s cost as a barrier to meeting the new standards.  It is highly unlikely that CCS would ever be economical. This is a good thing since even if CCS technology could be implemented, we would still be burdened with the negative impacts of mountain top removal coal mining and impoundments of waste left over from burning coal. That is why Green America has called out CCS technology as a red herring that distracts people away from the fact that coal can never be “clean”.

On the surface, it seems as though the proposed standards will effectively prevent new coal-fired plants from being financed and constructed. The coal industry argues that this could mean short-term struggle for thousands of workers and their families. However, the proposed standards have taken into account the potential long-term costs of continuing to burn coal at its current rate. Global climate change caused by the emission of CO2 and other greenhouse gases is predicted to lead to increased ozone pollution, higher average global temperatures, rising sea levels, and an increase in the frequency of extreme weather events. These effects of climate change can lead to enormous costs to public health, agriculture, and infrastructure in coastal regions. The long-term costs, predicts the EPA, far outweigh the short-term expenses to the coal industry, especially considering the fact that nation-wide, only one coal-fired plant is currently in the planning phase before construction. Although not part of the EPA’s calculations, if we are not building new coal plants to meet our energy needs, we will be increasing spending on energy efficiency and clean energy programs – both of which create high-paying jobs that are safer than those in the coal industry. Increased investment in these areas will also almost certainly lead to long-term savings in public health expenses.

These new standards make a minimal splash in practice, as current economic trends indicate that the cost of constructing a new coal-fired plant is not nearly as feasible as the cost of constructing a new natural gas – fired plant, and even a number of clean energy technologies. The EPA’s analysis is focused on carbon emissions from power plants (not the complete life cycle of the fuel going into the plant). Gas-fired units produce much less CO2 than coal-fired units, and are able to meet the proposed standards without the addition of control technology like CCS. Based on this fact, EPA analysis reveals that unless economic conditions shift drastically, making coal-fired plants the feasible choice again, private investors will turn to technologies that are already able to meet the standards without additional technology.

However, the turn to natural gas is itself a problem. While natural gas produces fewer emissions than coal fired power when burned, drilling for natural gas releases the potent greenhouse gas methane.  Fracking, the method of extracting natural gas from the earth, pollutes the groundwater of surrounding communities with a long list of chemicals. The fluids used in the fracking process can even lubricate fault lines, contributing to earthquakes. The new EPA regulations do not account for these factors of natural gas -powered energy, and natural gas producers are not forced to pay for the negative impacts of their drilling.  That’s why Green America supports a level playing field for green energy technologies – such as wind and solar.  Even without equal support from the federal government, wind and solar power are two of the fastest growing energy technologies in the US.  If the federal government forced all energy producers to factor their environmental impacts into their costs, clean energy technologies would account for a much larger portion of our energy portfolio already.

Overall, Green America applauds the direction of the EPA’s proposed rules regarding new power plants. The potential savings in public health and infrastructure costs from mitigating CO2 emissions far outweigh the revenues to be gained through the construction of new coal-fired plants with no restrictions placed on emissions. Limiting the amount of CO2 poured into the atmosphere by power plants is an important step for our nation to take. The standards will emphasize existing sources of power with emissions rates inherently lower than coal, and create an incentive for the further development of green energy technologies for our nation’s grid. It’s important to note that these proposed rules will only apply to power plants that have not yet been built. The EPA plans to unveil its proposed standards for existing power plants in the near future, which stand to face much greater opposition than last Friday’s.  If those standards are implemented, and we level the playing field for clean energy technologies, we will see a truly green energy future for the US emerge.

For more information on the proposed standards regarding new power plants, click here

To write a comment to the EPA, click here

This posting was written by Green America Climate Program Intern Sam Catherman.

Shareholder Support for Social & Environmental Issues Grows

socially responsible investingGood news on the shareholder education and action front! As reported in August, shareholder votes in favor of social and environmental resolutions in the 2013 proxy season marked a ten-year high, receiving 21% support on average. These resolutions constituted a third of all the resolutions filed; the remaining two-thirds addressed corporate governance issues.

The 21% support for social and environmental resolutions, which usually receive less support than corporate governance resolutions, is important to correcting corporate conduct. In order to be resubmitted for consideration by shareholders in the following year, resolutions need to receive at least 3% support in their first year, at least 6% in their second year, and at least 10% in their third year of facing a vote. Current vote trends bode very well for keeping crucial social and environmental issues in front of investors and in front of corporate management. Indeed, there were fourteen social and environmental resolutions that received at least 40% support in the 2013 shareholder season – including proposals addressing carbon pollution and energy efficiency.

Green America’s Shareholder Resolution Focus Lists highlighted a wide range of resolutions, including votes on energy and climate-related issues, banking, GMOs, toxics, human rights, corporate lobbying, and other investor concerns. The chart above shows how many of the resolutions we highlighted ultimately came to a vote. Resolutions that were withdrawn represent progress in the dialogue process that generally precedes the filing of a resolution. If the resolution filer believes the company is making moves in the right direction, the filer may withdraw the resolution for now, and see whether progress at the company continues.

If you own direct company stock that makes you a part owner of that company. Vote your proxies each year to alert management to your concerns and to push the company toward better practices. The main proxy season is in the spring – Green America will remind you and will bring key votes to your attention!

Thanks to the Sustainable Investments Institute for the chart on Green America’s Shareholder Resolution Focus List. 

Keystone XL Decision – in 2014? Or, the President Could Just Say No Now. New Report Reaffirms KXL Fails the Climate Test

Looks like there will be further delay when it comes to the White House’s determination whether or not to reject the Keystone XL pipeline. Conflicts of interest have come to light that call into question the validity of the latest environmental impact statement on the pipeline. The Office of the Inspector General is investigating concerns that Environmental Resources Management, the contactor responsible for the environmental impact statement, had worked for the prospective pipeline builder (TransCanada Corp.)  and for other oil interests that would benefit financially from the KXL.

So while we expected a Presidential decision on the KXL any time now – the Administration isn’t likely to make a move before the Inspector General’s report next year. This buys us more time to oppose the pipeline. On the other hand, Mr. President, why not cut to the chase and oppose the Keystone XL pipeline now, in accordance with your commitment to reducing carbon pollution?

newcoverToday, Green America joined our colleague organizations in the release of a report authored by the Sierra Club and Oil Change International, “Fail: How the Keystone XL Pipeline Flunks the Climate Test.” The report compiles all the information that the President and the public need to understand the wisdom and necessity of halting the Keystone XL pipeline – now and forever.

Oil Spills — There is Damage That Cannot Be Undone

This past weekend’s New York Times article on the environmental, social, psychological, and financial costs of oil spills is a sobering reminder of the vast toll on people and planet when oil spills occur. As President Obama considers whether or not to approve the dirty tar sands Keystone XL pipeline, the lessons of recent heavy, Canadian crude oil disasters are grounds enough for saying no.

After three years of clean-up, the Enbridge Energy spill in the Kalamazoo River and Talmadge Creek in Michigan is still not complete. The spill is the company’s largest. Enbridge believes that clean-up costs will approach $1 billion. The long clean-up time and staggering costs are not surprising if you consider that the more than 840,000 gallons of oil released were heavy crude that is extra difficult to clean up. As reported in the Times article, “The (Environmental Protection Agency) estimated that 180,000 had most likely drifted to the bottom, more than 100 times Enbridge’s projection.”

And more recently this past spring in Arkansas, an ExxonMobil spill of heavy, Canadian crude oil dumped approximately 210,000 gallons in a residential neighborhood. Residents, the State of Arkansas, and the Justice Department are all involved in litigation against ExxonMobil for damages.

Why would take on additional oil spill risks with heavy Canadian crude when we cannot cope with existing spills? The contamination of the natural environment endures, and as one affected resident in Michigan summed it up,” There are not enough zeros to pay us for what we’ve been through.”

President Obama, your new climate commitments demand a rejection of the Keystone XL pipeline now.