Sen. Ron Wyden offered a detailed but tricky path forward Tuesday on how to handle a major federal tax credit for solar power. The Oregon Democrat, who is at the forefront of energy tax issues, is confident that he can make progress on some of them. But he’s hedging about whether solar companies will achieve their most immediate request to expand the credit.
Wyden’s cautious support, according to an industry source familiar with solar negotiations in Congress, “comes at the detriment of the entire industry.”
The bad news for the solar industry is that Wyden, among its most influential proponents, needs convincing that the solar tax credit “doesn’t reward cheating.”
“That’s key,” Wyden said Tuesday. “I’m a very strong supporter of solar, but I don’t believe that Congress wants to reward cheaters.”
Senate Democrats, including Wyden, unveiled a broad energy bill Tuesday. As the Senate Finance Committee’s ranking member, Wyden said at a press conference that he is “working closely” with Chairman Orrin Hatch (R-Utah) and committee members Dean Heller (R-Nev.) and Maria Cantwell (D-Wash.) to extend the commercial portion of the solar investment tax credit, also known as the ITC.
The good news for ITC-hopefuls: “I think we’re all going to be able to be in agreement,” Wyden said. “Absolutely, we’re going to get it done this year.”
The provision that needs fixing now, according to solar advocates, is the commenced construction date for commercial-scale projects. Under current law, project developers need to have a solar-powered unit up and running by Dec. 31, 2016, in order to take full advantage of the 30 percent tax credit. Because it often takes upwards of three years to complete a utility-scale project and about one year for a commercial scale project, developers are already starting to feel the pinch.
The Senate is set to vote on a package of tax extenders in the coming weeks that would extend the separate Wind Production Tax credit for two years. But that package includes nothing for solar.
Solar proponents hope to tack on an amendment to the Senate measure to change the commenced construction date. It’s unclear what route the House will take with renewable energy tax credits. So far, neither tax credit is in the House Ways and Means Committee’s extenders package.
Amending the commenced construction language is doable in Congress, but only if proponents can build a case for the need to act now and convince lawmakers that the change is a no-nonsense fix. Here’s where Wyden’s hesitations could cause major problems for the solar credit.
Wyden told reporters the story of SolarWorld, a company embroiled in trade disputes, that is “a major employer in my state.”
In June, the Hillsboro, Oregon-based company won its second major trade case against Chinese solar module makers. The Commerce Department found that Chinese companies were hurting U.S. manufacturers by dumping solar panel products through unfair trade practices. The International Trade Commission later confirmed that the U.S. solar industry was indeed harmed, and it granted Commerce the rights to impose higher tariffs.
Wyden is not fully convinced that the tariffs are foolproof. As such, he is hesitant to fully embrace a tax policy that could, in his view, be used to support Chinese dumped products that undermine U.S. manufacturing.
The solar industry source said that the Wyden is worrying about nothing. “There’s zero evidence that anyone’s getting past those duties,” the source said.
Wyden may still have lingering doubts about cheating, but he is also among the biggest proponents of a long-term fix to the solar tax credit. For example, the Democrats’ energy bill would go further than the commencement construction language that lobbyists are hoping for this year.
The legislation calls for a technology-neutral tax incentive for cleaner energy, which would replace all current renewable energy tax credits after a temporary extension through 2018. These tax provisions, according to the bill’s authors, would reduce the cost of energy tax subsidies by 50 percent.
The legislation stands little chance of becoming law in a Republican-controlled Congress, but it puts Democrats on record for how they envision the future of renewable energy.
“We can have an opportunity for an orderly transition,” Wyden said. In his vision, renewable energy tax credits, including the solar amendment, would get passed this year. Then the other reforms could happen in the following years.
“It dovetails nicely with the short-term and the long-term,” Wyden said.