One of the largest subsidies for renewable energy generation, the federal production tax credit, is slated to end this year. While some in the industry support the end of these tax credits, members of the U.S. House of Representatives are drafting legislation that would extend and expand subsidies that benefit renewable energy generators.
The production tax credit (PTC) is an inflation-adjusted tax credit given to generators of certain types of renewable energy, including wind, biomass, and hydroelectric. Since 2018, however, only wind generation has been eligible for the program. Wind facilities will receive a $0.025 tax credit for every kilowatt-hour of energy produced in 2019.
If Congress does not extend the program, only projects that begin construction by the end of this year will be eligible for the PTC. Generators can claim these tax credits for 10 years after the facility is placed in service, meaning the program will continue to cost taxpayers through 2029.
While $0.025 might seem small, the PTC will cost U.S. taxpayers about $5.5 billion this year. We estimate the program will cost $65.1 billion before it phases out—if it is allowed to expire this year. Additionally, the benefits of this tax credit are felt most by just 15 large companies. These companies account for 75 percent of the eligibility for the PTC, which amounts to over $19 billion from 2007 to 2016.
In Texas, the PTC is one among many subsidies that benefit renewable energy generators. Our research suggests local and state subsidies total to about $18 billion through 2029. Combined with the PTC, which will dole out more than $16 billion to Texas wind facilities, and other federal subsidies, renewable energy generators in the Lone Star State will receive $36 billion in subsidy from 2006 to 2029.
Texans should be concerned about how the tax system is being used to benefit big energy companies at the expense of the taxpayer. Even worse, these subsidies are bolstering an energy source that fails to perform when needed most.
The hottest days of summer lie ahead, and our electric supply is getting tighter every year. Texans shouldn’t subsidize generators who can’t keep the air conditioning on.
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