The solar and wind industries can now breathe a bit easier. With President Barack Obama's signage of a $1.1 trillion spending bill on Friday, which includes tax breaks for everything from the child care to wind and solar construction, the renewable energy sector can now look ahead for a few more years of help from Uncle Sam.
The everything-in-one spending bill allows for $622 billion in tax credits, including a five-year extension on the Investment Tax Credit (ITC) for solar and the Production Tax Credit (PTC) for wind. The ITC allows for a 30 percent tax credit through 2019, when it will then gradually ramp down to 10 percent, ending in 2022. The PTC is also geared to boost production over the next few years, with tax credits gradually decreasing after 2017.
Some analysts are calling this extension a win-win for the solar industry, which was expected to show a 24 percent increase in production next year. Instead, the new projection is a slower, more incremental boost in production over the next five years, which Bloomberg Businessweek suggests will ultimately translate to less overhead for solar installation companies. Wind will benefit as well, with a better line of sight toward revenue-boosting projects. Analysts are expecting another 20 gigawatts added to the solar mix and 19 gigs to the wind sector.
In all, the two tax credit extensions are expected to boost renewable energy investment by $73 billion and add renewable energy to another 8 million homes.
The surprise announcement also provided a shot in the arm to two of the country's largest renewable companies, SunEdison and SolarCity, which both registered a significant jump in stocks after Congress agreed on the spending bill.
With all of the pluses being touted for this mega spending bill, not all Democrats were willing to vote for its added benefits to the fossil fuel industry. The bill also opens the door to lifting the ban on oil exports. In an 11th hour plea, House Minority Leader Nancy Pelosi appealed to her caucus to vote for the bill. Still, the 77 Democrat and 241 Republican yeas in the House were enough to send the bill on to the Senate, which passed it 65-33, preparing the way for the president's signature.
Other last-minute picks on the omnibus spending bill included the continuation of the "Nascar tax break," which was officially enacted in 2004 as a nod toward the costs incurred by race tracks of all stripes and species. Both the horse- and car-racing industries rely on the tax break to cover construction costs.
With the increasing decline of the horse-racing industry and this month's landmark agreement between global leaders to end the use of fossil fuels, the Nascar tax break fits neatly in place with the incongruity of a bill that now allows for fossil fuel exports. Neither are likely to have the long-term investment return that the renewable tax credit is likely to show. But, as Pelosi noted, their inclusion offered just enough holiday cheer for everyone to get the bill signed and avert a shutdown.
Jan Lee is a former news editor and award-winning editorial writer whose non-fiction and fiction have been published in the U.S., Canada, Mexico, the U.K. and Australia. Her articles and posts can be found on TriplePundit, JustMeans, and her blog, The Multicultural Jew, as well as other publications. She currently splits her residence between the city of Vancouver, British Columbia and the rural farmlands of Idaho.