Renewables, Electric Vehicles Dodge a Bullet in US Tax Bill

Electric car makers and the renewable energy industry can mostly breathe a sigh of relief after many feared changes to the US tax code would weigh on demand for clean technology.

The House bill released last month took direct aim at federal subsidies for electric vehicles, wind energy and solar power. The Senate left current policies unchanged, but its bill contained financial provisions that would have eroded the value of wind and solar tax credits, CNBC reported.

The final Republican tax bill passed this week restored the status quo on many fronts, but clean energy lobbyists are not resting easy just yet. A complicated provision made its way into the bill and the renewable power industry worries that it could still weigh on demand. The House sought to repeal a credit that allows car buyers to claim up to $7,500 for electric vehicle purchases or leases. That raised concerns that demand for the plug-in vehicles would plummet. It also put American jobs at risk, according to Calstart, a clean transportation group. Electric vehicle and component manufacturing employs more than 215,000 US workers, according to Department of Energy research cited by Calstart. The final bill keeps the credit intact.

The House also proposed reducing the tax credit for building wind energy facilities. It would have knocked the current 2.4 cents per kilowatt/hour production tax credit down to 1.5 cents per kilowatt/hour. Lawmakers also suggested retroactively changing the rules that determine which wind projects qualify for the production tax credit. That means developers who started projects under the old guidelines would have to prove those projects meet the new guidelines. If they could not provide proof, they would no longer qualify for the full credit and would likely see their project costs rise.

Neither provision survived the conference process in which the House and Senate reconcile their bills.

The House bill also would have ended a tax credit for investment in solar power for commercial properties and large solar farms. The 30% investment tax credit is scheduled to gradually reduce to a permanent 10% rate in the coming years, but the House aimed to eliminate the credit altogether after 2027.

The provision was not a major concern, but it would reduce long-term certainty and force the solar industry to plow its time and energy into a campaign to extend the credit.