US Congress extends renewables credit, ethanol tariff

New York, 21 December: The US Congress sent Christmas gifts to the green energy industry, extending tax credits for renewable electricity and also extending an import tariff to protect ethanol producers.

On 20 December, President Bush signed the Tax Relief and Health Care Act, which extends the Production Tax Credit (PTC) for renewable power sources through 2008. The PTC provides a credit of 1.9 cents for each kilowatt-hour produced by certain renewable energy sources, for 10 years after they begin operating.

It was scheduled to apply to projects coming online through 2007, but renewables backers urged Congress to act early to extend the PTC, to provide certainty for investors and lenders.

But a mere one-year extension makes many renewables advocates anxious. A group of 42 senators from both parties wrote to President Bush on 15 December urging him to include a five-year PTC extension – to the end of 2013 – in his fiscal year 2008 budget request.

"In the past, the short-term, start-and-stop nature of the credit has not sufficiently provided utilities, developers, manufacturers and investors with the necessary certainty to maximise the vast potential for renewable technologies," they stated. "A long-term credit of five years will give businesses the stability necessary to plan and finance renewable energy projects."

The Tax Relief Act also provides accelerated depreciation for cellulosic ethanol plants that begin operating by the end of 2012, allowing them to claim greater tax deductions in the early years. These plants create ethanol from agricultural residue, wood fibres and grasses. Most ethanol in the US is produced from corn (maize), but the more complicated cellulosic process yields is expected to be more environmentally-sound.

Finally, the bill extends a 54 cents/gallon tariff on imported ethanol through 2009, from its scheduled expiration in October 2007. The American Coalition for Ethanol, in Sioux Falls, South Dakota, applauded the extension, saying that removing the tariff "would have paved the way for US dollars to be wired to Brazil, with American taxpayers subsidising already-subsidised foreign ethanol".