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Renewable energy projects get a pandemic break from IRS

Deadline for finishing projects benefitting from the renewable energy tax credits was extended because of pandemic-driven construction delays

The Ivanpah Solar Electric Generating Station in the Mojave Desert in California.
The Ivanpah Solar Electric Generating Station in the Mojave Desert in California. (Bill Clark/CQ Roll Call file photo)

Most people don’t want to hear from the IRS. The renewable energy industry was glad to.

Facing a deadline to qualify for federal tax credits, renewable energy developers will get an extra year to complete construction and bring their projects online under new Internal Revenue Service guidance, which the agency issued in May, drawing bipartisan and industry praise.

The IRS decision, released due to the pandemic that has slowed construction, permitting and disrupted shipments and supplies, according to experts, gives companies that broke ground on new projects in 2016 and 2017 until 2021 and 2022 to finish their work and qualify for the credits.

While the policy applies to biomass, geothermal, landfill gas, hydroelectric, solar, fuel-cell and other businesses, it is distinctly vital for the wind business, which saw a surge in construction in 2016 specifically tied to the tax credit schedule. 

“It applies broadly, but it’s particularly important for the wind energy sector,” Greg Wetstone, president and CEO of the American Council on Renewable Energy, said in an interview. 

Pre-pandemic, the checkpoints under the incentives at stake — the investment tax credit and the production tax credit — were clear, he said. “Four years to place that project in service and then you get that credit, no questions asked.” 

The pandemic, which has killed more than 100,000 Americans and ravaged the domestic renewable energy industries — roughly 600,000 people in clean-energy jobs have been laid off since March, according to one tally  — placed a cloud of uncertainty over companies’ plans and finances, Wetstone said.

“Suddenly all these projects may not finish in time and all of a sudden may not qualify for the credit,” he said.

Senators of both parties, including Sens. Ron Wyden, D-Ore., Thom Tillis, R-N.C., and Lisa Murkowski, R-Alaska, chairwoman of the Senate Energy and Natural Resources Committee, welcomed the move.

“This common sense move will help protect these projects and the jobs created by them,” Wyden said. Tillis said the decision would protect North Carolina jobs, and Murkowsi said Friday it would “help with the economic recovery ahead.”

Murkowski, Tillis and Sen. Susan M. Collins, R-Me., who is facing a tough re-election campaign, wrote Treasury Secretary Mnuchin on May 21 to extend the window for businesses to qualify.

Clean energy jobs

Clean energy employment has been a bright spot in the economy in recent years, but the pandemic has forced it to scale back significantly, said Doug Vine, senior energy fellow at the Center for Climate and Energy Solutions. 

“There have been so many jobs that have been affected that it takes them back to 2014 levels,” Vine said in an interview. “Every couple weeks, it seems like there’s a new forecast that ticks the number up a little higher.”

The authors of the report that showed about 600,000 people had lost their jobs in clean energy careers since March also predicted that figure would hit 850,000 by June.

Social distancing requirements, shuttered offices and shut-down orders thwart installers who need to enter buildings from doing their work. “There may be limited access,” Vine said, adding that technicians in the energy efficiency business have been hit particularly hard.

While the pandemic has affected international trade, and companies that manufacture renewables require foreign parts to do so, it generally hasn’t delayed the delivery of parts to U.S.-based companies, according to Tara Narayanan, an analyst at BloombergNEF.

“The actual delivery of equipment has not been hurt too much,” Narayanan said in an interview. 

Many solar panels and their components in the U.S. come from Southeast Asia, a region that has fared generally better than others in combating the virus, and Narayanan said the flow of goods has not been upended.

She said developers are “wary” money for new projects will be harder to come by due to the crisis. Before COVID-19 engulfed Americans’ lives, wind was on track for a record-breaking year and necessities to install new projects, like trained specialists and cranes, were highly sought after, said Narayanan. “Construction was slightly stretched even before this happened.”

In an April 8 report on renewables in the U.S., Narayanan and her co-authors sum up the situation in a pithy subtitle: “It’s going to be a bumpy ride.”

Strong start

Wind energy whooshed into the new year.

It added a record amount of new capacity in the first quarter — 117 percent more than the same period of 2019 — to the grid. Forecasters at the Energy Department projected electricity from renewables would pass nuclear and coal by 2021, if not sooner. And the majority of new electric generation built last year were renewably powered, led by new wind and solar projects.

Globally, renewable energy comprised about 75 percent of all new capacity that came online in 2019, the International Renewable Energy Agency said in March.

Melissa Lott, a senior research scholar at Columbia University’s Center on Global Energy Policy, pointed out the IRS made its decision without Congress directing it to do so through coronavirus relief legislation or another bill. 

“Intead this guidance has already come through,” said Lott. “It’s giving a little bit of breathing room.”

Senate Finance Committee Chairman Charles E. Grassley, R-Iowa, a longtime supporter of wind power, urged Treasury in an April letter to extend both the PTC and ITC deadlines. Wind is the largest source of electricity in his state.

Sens. John Thune, R-S.D., Maria Cantwell, D-Wash., and Joe Manchin III, D-W.V., the top Democrat on the Senate energy committee, also signed the letter.

Wind power is the largest producer in Grassley’s home state and produces more than 20 percent of electricity in six states, according to the American Wind Energy Association: Iowa, Kansas, Maine, North Dakota, Oklahoma and South Dakota.

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