Earlier this month, Congress handed the costs that stretches the Production Tax Credit (PTC) and Investment Tax Credit (ITC) which have benefited breeze and solar, respectively. That is big news for the U.S. 73 billion in new investment and enabling as many as 8 million more households to gain access to clean, green, affordable energy. In exchange for the tax credit expansion, Congress has raised the 40-calendar-year ban on crude essential oil exports that started with the 1970s Oil Embargo Crisis. Environmentalists and energy experts (among others) are requesting if this grand bargain is excellent. It is thought by us is. The expenses of solar and breeze power have been falling and sharply for years continuously.
They are broadly expected to end up being the cheapest way to create power in the U.S. 2020, as reported by Bloomberg, Fortune and U.S. News & World Report. But first we have to make it to 2020, and between here and there is a potential “valley of death” as bonuses expired. 0.023/kWh PTC already expired by the end of 2014, and the breeze industry went through another devastating boom-and-bust cycle along with it. Calendar year As well as the 30-percent solar ITC were arranging to drop significantly to ten percent next, with many industry players predicting a consequent crash in what is a robust and quickly growing market. But that has transformed now.
1. The extension gives breeze and solar time to accomplish parity (or better) with typical generation without subsidy. According to Lazard’s Levelized Cost of Energy Analysis – Version 9.0 (PDF), in November released, the LCOEs for breeze and solar have dropped 61 percent and 82 percent, respectively, within the last six years.
This places unsubsidized best-in-class blowing wind and solar on par with or much better than new gas-fired generation already. 2. Big companies going after power purchase agreements (PPAs) for large off-site wind and solar transactions will continue to see competitive prices. This year we have seen record-low PPAs for wind and solar tasks, such as Austin Energy’s recent utility-scale solar procurement at significantly less than 4 cents per kilowatt-hour and the best wind PPAs clocking in at 2.50 cents per kWh. The PTC and ITC ensure that renewables projects continue along their historical declining cost curve – the worthiness of the extension goes beyond the existing prices of these technologies; it’s about keeping their trajectories.
- Saving for emergencies
- “Goldman Closes BRIC Fund,” The Wall Street Journal, November 9, 2015
- The exclusion under 137 for adoption expenses
- Development of the free cash stream
The PTC and ITC extensions are thus great news for the best corporations which have been generating significant capacity additions of alternative energy in the U.S., such as through the membership of RMI’s Business Renewables Center. They’ve signed deals to get more than 3 GW of new large-scale, this season off-site green capacity, and we’re hopeful of an even more powerful 2016 thanks to continued PPA price competitiveness. And it’s not simply the Fortune 500 who’ll benefit. So will low-income customers, such as RMI is working with through eLab Leap, whether via utility-scale tasks that contribute to a lower-cost grid, direct subscription via mechanisms such as community solar, or other solutions.
3. Because the PTC and ITC decline over a period of years gradually, the industry can plan accordingly, avoiding boom-and-bust cycles. In prior years, the threat of PTC/ITC expiration (or their real expiration, before renewal or expansion) has resulted in major boom-and-bust cycles, such for wind. But now, a predictable and continuous decline over an interval of years provides both renewable energy sectors clear glide paths to a post-subsidy period, similar to Germany’s deliberate step down of its feed-in tariff.