Sustainable Energy Subsidies

By Powers, Melissa | Environmental Law, Spring 2013 | Go to article overview

Sustainable Energy Subsidies


Powers, Melissa, Environmental Law


I.   INTRODUCTION
II.  THE IMPORTANCE OF SUBSIDIES IN A DISTORTED MARKET
     A. Climate Change, Externalities, and Fossil Fuels
     B. The Flawed Arguments of Subsidy Opponents
        1. Fossil Fuel Subsidy Reforms Are Inadequate
        2. The Electricity Sector Is Not a Free Market
III. THE EFFECTIVE, BUT UNSTABLE, PTC
     A. The Economic Consequences of the Unstable PTC
     B. The Political Consequences of the Unstable PTC
IV.  ALTERNATIVES TO INTERMITTENCY
     A. A Modified FTC
     B. Treasury Grants for Production
V.   CONCLUSION

I. INTRODUCTION

On January 1, 2013, the wind power industry and advocates of renewable energy breathed a sigh of relief when Congress renewed the Production Tax Credit (PTC) for another year. (1) The wind power industry had sought an extension of this critical subsidy for more than a year, without any response from Congress. Midway through 2012, the failure to secure an extension had already adversely affected the industry. (2) By that point, it also appeared that a short-term extension would come too late to do any good, because the existing PTC required facilities to be placed in service to be eligible for tax credits--and wind projects often take more than a year to develop. (3) Congress nevertheless renewed the PTC for another year as part of the grand bargain to prevent the United States from going off the "fiscal cliff." (4) Moreover, Congress modified the eligibility requirements to allow facilities that began construction before 2014 to qualify for production tax credits. (5) At first glance, it appeared that Congress's delay in extending the PTC would not significantly stifle wind power development.

However, by the middle of February 2013, analysts predicted that the PTC extension would offer little benefit to the wind power industry. In theory, by tying the tax-credit eligibility to the start of construction, rather than its completion, the PTC extension should have given wind developers more breathing room. (6) Yet, uncertainty about how the Internal Revenue Service (IRS) would implement the revised PTC led many wind energy companies to delay investing in new facilities. (7) Even without the uncertainty surrounding the IRS rules, it was unclear whether the revised PTC would promote significant development of new wind farms, given that it can take more than a year to negotiate the deals and secure the permits necessary to begin construction. (8) At most, it seemed likely that a one-year extension of the PTC would benefit companies that began wind projects in (2012) or earlier but, for some reason or another, failed to complete them in time. (9)

On April 15, 2013, the IRS finally issued its guidance regarding the activities that qualify as the "beginning of construction" to be eligible for the PTC extension. (10) Under the IRS guidance, the commencement of any "physical work of a significant nature" would qualify. (11) More importantly, facilities would also be eligible for the PTC under a "safe harbor" provision available to developers that pay or incur at least 5% of the total cost of a facility before January 1, 2014, and that make "continuous efforts to advance towards completion of the facility." (12) Thus, under the guidance, developers could begin building or investing in wind facilities by the end of 2013 to qualify for the PTC.

For the wind energy industry, the IRS guidance must have triggered great relief. The safe harbor provision would seemingly afford companies time to design new wind farms, secure permits, and negotiate contracts for turbines and electricity delivery. However, the IRS guidance may also lead to a boom cycle, in which prices spike as developers rush to meet the deadlines. At the end of the day, the IRS guidance will likely only perpetuate the cycle of uncertainty plaguing the wind energy industry.

Unfortunately, uncertainty has become a recurring problem affecting renewable energy development in the United States. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Sustainable Energy Subsidies
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Author Advanced search

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.