Both Sens. Barack and Obama and John McCain have touted the importance of solar and wind energy to our energy future on the campaign trail (although Sen. Obama seems to favor it more while Sen. McCain seems to favor the development of nuclear energy more). Why, then, is there any debate in the Congress about whether to extend the investment credits for solar and wind energy investment?
WASHINGTON – Congress is putting the short-term future of renewable energy companies in jeopardy even as the presidential candidates and most lawmakers hail windmills, solar panels and biofuels as long-term solutions to high gasoline prices and global warming.
Some $500 million in investment and production tax credits will expire Dec. 31 unless Congress renews them. Without that help, solar and wind power companies say they will reverse planned expansions and, in many cases, cut payrolls and capital investment.
The answer to the question appears at the end of the article:
Putting expiration dates on tax breaks is a useful budget gimmick for lawmakers seeking to mask the growing federal budget deficit.
Because they are set to expire at a certain date by law, they do not count as revenue losses after that date even though most people assume Congress eventually will act to extend them. The Bush tax cuts of 2001 and 2003 are the biggest extenders of all in this respect. Trillions of dollars will be added to the federal debt if Congress chooses to make them permanent after they are set to expire in 2010.
Clearly, in the hierarchy of values getting reelected overwhelms the importance of an energy plan that reduces the relative of importance of oil in the energy mix. Politics over policy.
But that’s not the only aspect of the article I found infuriating. Either government incentives are necessary to encourage investment in wind and solar energy or they are not. The wind and solar energy companies seem to think that they are:
Schott Solar has visions of quadrupling its operation in Albuquerque, N.M., to reach 1,500 jobs and $500 million in investment. But the investment tax credit, company spokesman Brian Lynch said, is what makes solar power cost-competitive. Without it, expansion plans must be reconsidered.
Yet in the very next sentence the talisman of the market is waved:
“We don’t want to build a giant factory that the market doesn’t need or want,” Lynch said.
The irony of that sentence seems to be lost on its speaker. If a giant factory isn’t economically viable without subsidy then by definition the market doesn’t need or want it.
As I’ve said before my own view is that we shouldn’t subsidize solar or wind energy and we shouldn’t be subsidizing oil consumption, either. Get rid of the subsidies first. Then we can speak intelligently about letting the market decide. Having the Congress devote its energies to improving the regulatory environment might be nice, too.
There is an important nugget of truth in the article:
“A big part of the problem is uncertainty,” said Marie Lee, a tax analyst with the American Electronics Association. “Our companies are getting tired of this game.”
While short horizons may be convenient for Congress they make life difficult for companies. However, when you’re a creature of government you should be prepared for the vagaries of your patron.