Memo: Billions of dollars in energy savings, wind energy development under threat from Congress

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From: Bob Keefe, Natural Resources Defense Council

Four important federal tax incentives driving critical energy-saving gains unfortunately expired at the end of 2013. It is essential that Congress extend the energy efficiency incentives created under the Energy Policy Act of 2005 in order to ensure continued growth of America’s cheapest fuel source, energy efficiency, creating tens of thousands of new jobs throughout the country. Failure to act would increase dangerous pollution, sacrifice employment growth, and stifle U.S. innovation and competiveness.

Congress needs to act quickly to extend these important tax provisions – or risk stifling energy efficiency savings that could generate $8.3 billion in economic activity and sucking the air out of the wind industry, which last year was the country’s fastest-growing energy supplier and the source of an estimated 80,700 American jobs.

We urge you to inform the public about what would happen if these important tax provisions are allowed to expire, and use your editorial pages to encourage your members of Congress to extend the Production Tax Credit (PTC) and Investment Tax Credit (ITC) and key energy efficiency tax credits for homes, commercial buildings and appliances.

Here’s some more detail on the expiring energy tax credits:

*Credit for Residential Energy Efficiency Improvements (25C):

Under 25C of the tax code, a homeowner can receive a tax credit for 10 percent of the cost of energy-efficient building improvements, such as windows, furnaces, main air circulating fans and other HVAC equipment. In addition to benefitting homeowners by reducing their energy costs, manufacturers and installers – and their employees – also benefit.

*Credit for the Construction of Energy-Efficient Homes (45L):

Section 45L provides a $2,000 tax credit to builders who achieve a 50 percent reduction in heating and cooling energy use compared with a home built to the 2006 code. In addition to providing energy savings for homeowners, studies show that efficiency can increase a home’s value by about 9 percent. (Meaning an average 2012 home of $280,000 could be valued as high as $305,000.)

*Credit for the Manufacture of Energy Efficient Appliances (45M):

Section 45M promotes the manufacture of high-efficiency appliances, including refrigerators, dishwashers, and clothes washers. Extending the credit would not only save homeowners money on their energy bills, but also encourage domestic manufacturing of high-efficiency appliances. According to the Association of Home Appliance Manufacturers (AHAM), 40,000 jobs are affected by this tax credit.

*Deduction for Commercial Buildings (179D):

Under 179D, private building owners or public building designers who cut energy use by 50 percent compared to the 2001 building code may take a tax deduction of up to $1.80 per square foot when the reduction is accomplished through changes in the lighting, heating, cooling, and ventilation systems, or the building envelope. More efficient schools and commercial buildings means less wasted energy and more savings on energy bills – savings that can be used for vital school programs or reinvested into the economy.

*Production Tax Credit (PTC):
The PTC has been one of the single-biggest drivers of wind power development over the past decade and it’s crucial to transitioning the nation away from dirty fossil fuels toward more renewable energy. Under the PTC, utility-scale wind farms can get a 2.2 cent per kilowatt-hour tax credit for the power they produce during the first 10 years of operation. Thanks to the PTC, the wind industry now generates enough electricity to power 15 million homes and providing as much as 20 percent of all electricity in some states. Last year alone, the PTC helped drive $25 billion of private investment into our economy.

*Investment Tax Credit (ITC):
The unique challenges of the offshore wind energy require a different form of financial incentive than onshore wind. In January 2013, Congress extended the ITC for offshore wind projects that begin construction before January 1, 2014. No U.S. offshore wind developers have been able to apply for ITC yet because they are not yet in the construction phase, but several offshore wind projects are advancing and poised for construction in 2014. The potential of offshore wind is huge: harnessing just a fraction of the wind off our Atlantic coast alone could power almost 14 million U.S. homes and create $200 billion in new economic activity (including the potential for some 300,000 new jobs).

It’s important to put energy tax credits in perspective.

For more than 100 years, taxpayers have given billions of dollars in subsidies to fossil fuel companies. We continue to do so, even though oil and gas companies are now the most profitable businesses on Earth and our use of fossil fuels is driving climate change and a myriad other environmental disasters.

By comparison, tax credits for renewable energy and energy efficiency drive American innovation, encourage emerging industries – and help to reduce dangerous pollution and address climate change and health problems.

For these reasons and more, Congress — for the good of the public — should extend these tax credits, before it’s too late.

For more information, see:

NRDC’s fact sheet on energy efficiency tax provisions here: http://www.nrdc.org/energy/energy-efficiency-tax-incentives.asp