On Vegas, Recession, and the Politics of Tax Breaks

Our main areas of focus here at Getsolar are photovoltaics and solar hot water heating systems–those technologies that we, as individuals, can incorporate into our daily lives to lower our energy bills and lessen our dependence on carbon-intensive energy sources like coal. But on occassion, advancements in other technologies merit our attention. The February 22 inauguration of Nevada Solar One is just such a case.

The new plant derives electricity by concentrating the sun’s rays (hence the name “concentrated solar power,” or CSP) to boil water, the steam from which drives a turbine. A project of Acciona, a Spanish engergy company, Nevada Solar One is touted as the world’s largest CSP plant to be built in 17 years. And at 64 megawatts, it is said to have enough umpf to power 17,000 homes.

As many observers note, however, the future of CSP in the U.S. largely depends on state law requiring utilities to generate a certain portion of their electricity from renewable sources–the so-called renewable portfolio standards (RPS). Equally, if not more, important is whether Congress will vote to extend tax credits for commercial investments in solar energy. (The bill also has do-or-die implications for the wind-energy industry, and, if passed, would likewise double the tax incentive for individuals buying solar-power systems from $2,000 to $4,000).

Thus far, Senate Republicans have blocked the legislation twice, with President Bush threatening veto because the new incentives would be funded by taking tax breaks away from gas and oil producers. This should hardly be surprising, given that many southern states, whose economies don’t stand to benefit from renewable energy credits, are largely represented by Republicans. Nor, for that matter, should it surprise us that oil companies are opposed to losing billions of dollars in tax incentives. This is the politics, after all, of a large, regionally diverse country that values the merits of federalism and individual state power.

What should surprise us, however, is if Washington makes the mistake of neglecting the renewable-energy sector–especially on the cusp of a recession. President of the Solar Energy Industries Association (SEIA), Rhone Resch, recently cited a new study showing that, if Congress fails to extend tax credits for renewables, upwards of 116,000 U.S. jobs and nearly $19 billion in U.S. investment could be lost in just one year. While these numbers are by no means astronomical (Exxon’s profits alone topped $40 billion last year, this in a $13-TRILLION economy), they are certainly not trivial. Strong bi-partisan support for a $180 billion stimulus package shows that Washington won’t shy away from fiscal measures in their efforts lessen the impact of an economic downturn. In the light of the phenomenal rates of growth in renewables in recent years, it’s not unreasonable to suggest that extending incentives to this sector would help ensure that this growth continues.

While extending such credits would theoretically raise energy prices by making oil companies pass the burden of lost tax breaks onto consumers, the increases are likely to be minimal: oil is a commodity that’s traded in immense volumes on an international market, and Congress’s current proposal would only nullify tax breaks for the Big 5 (Exxon, Chevron, ConocoPhillips, Shell and BP), while freezing incnetives for smaller oil companies at 6 percent. I, for one, would welcome additional increases in the price of gasoline, provided that they be accompanied by reductions in the price of renewable alternatives. Recent polls suggest I may not be alone in this regard.