GOP Tax Plan Pulls the Plug on Renewable Energy
The GOP tax reform plan barreling toward a vote in the Senate could deal a devastating blow to the renewable energy industry. Unlike the more draconian House version, the Senate bill does not slash renewable tax credits directly, but it does impose steep taxes on the companies that help finance renewable development. Leaders in the wind and solar sector warn that such hikes would undercut the industry’s most important financing tools.
“Almost overnight, you would see a devastating reduction in wind and solar energy investment and development,” Gregory Wetstone, the head of the American Council on Renewable Energy, said in a statement.
When Senate Republicans released their tax plan two weeks ago, renewable advocates were initially relieved. The House bill, released in early November, proposed cutting the Production Tax Credit (PTC) for renewables by a third, eliminating the Investment Tax Credit for solar production, and repealing the electric vehicle purchase credit.
The American Wind Energy Association warned that the House bill would threaten 50,000 jobs and more than $50 billion in planned investment in the wind sector alone. (However, the bill does include a generous $15 billion subsidy for coal, oil, and gas companies.)
The Senate version makes no changes to renewable credits, but other parts of the bill would be just as damaging. A new proposal, the Base Erosion Anti-Abuse Tax (BEAT), targets multinationals that stash money overseas to avoid paying U.S. taxes. Under the proposed change, these corporations would lose many of the deductions they typically claim.
But the tax would also effectively cancel out the renewable credits enjoyed by the multinationals that play a major role in financing renewable projects. Typically, when companies like Goldman Sachs or Facebook invest in a renewable energy project, they get a portion of the profits along with a renewable tax credit. On average, these agreements make up between 40 percent and 60 percent of the capital costs for new solar or wind projects.
If BEAT swallows up those credits, corporations may be far less likely to invest in renewable energy projects, which could deal a severe blow to solar and wind energy production. BEAT would also apply retroactively, threatening existing renewable projects.
In a joint letter to Senate leaders, representatives from four major renewable trade associations expressed alarm at these “extremely problematic” tax provisions. “Not surprisingly, major financial institutions have indicated that, under such a regime, they would no longer participate in tax equity financing,” the group warned. “The tax equity marketplace would collapse under these provisions, leading to a dramatic reduction in wind and solar energy investment and development.”
Ironically, such cuts would disproportionately hurt Trump country:
The tax plan threat comes on the heels of a landmark Lazard study that appeared before the Senate released its bill. Researchers concluded that building new utility-scale renewable projects in certain regions can be cheaper than existing fossil fuel sources. But the authors also stressed that such progress depends on the renewable tax credits.
Both GOP tax bills follow the familiar pattern propping up the fossil fuel industry while sowing deep uncertainty about the future of renewables. At a time when solar and wind development has never been more critical—or more profitable—President Trump and his congressional allies are pushing a tax regime that would compromise America’s ability to fight the global climate crisis