Moving From Renewable Tax Credits to Cash Incentives Could Save Money

Government could sustain support of the solar and wind industries at much lower cost to taxpayers by replacing current tax credits with cash incentives, according to a new report by Climate Policy Initiative (CPI), Supporting Renewables while Saving Taxpayers Money.

The report says that, for example, a taxable cash incentive for wind energy could deliver the same support to wind projects as current policy and almost halve the cost to taxpayers.

CPI’s report finds that federal wind and solar incentives bridged roughly half the gap between the costs of renewable electricity generation and electricity market prices for wind and solar projects financed in 2010. Assuming that current federal policies are sustained, performance and technology improvements mean that the average wind project financed in 2013 would be nearly viable through federal incentives alone, while solar projects would still require some state support.

The report recommends two changes to federal wind and solar incentives:

1. Extend the wind production tax credit and deliver it as a $21/MWh taxable cash incentive. This would have the same value to projects, reduce inefficiencies, and reduce government costs by almost half for every unit of clean electricity generated.
2. Give solar photovoltaic projects the option to take a 20% 1603 cash grant in lieu of the current 30% investment tax credit. This would simultaneously reduce government costs while better supporting solar energy projects.