Library filed under Taxes & Subsidies
MAKE estimates nearly 3 GW of hedged projects will come to fruition during our forecast period, with developers that are unable to obtain a PPA or access alternative finance arrangements being forced to cancel development plans or sell their assets to larger IPPs with greater financial capabilities. The window of opportunity for these stressed developers will not be open indefinitely. ...PTC-qualified developers in need of offtake agreements will be scrambling to find financing that allows them to partake in the U.S. wind industry’s latest bubble.
According to the report, published online in December by the Treasury Inspector General for Tax Administration, eight of 16 large firms examined may have filed for either the federal Production Tax Credit or Investment Tax Credit on projects that had received 1603 program funding. Smaller businesses, including some sole proprietorships, fared worse: 51 of 83 such ARRA grant recipients examined may have filed for tax credits on subsidized projects, about 61 percent of the total.
What's the real cost of wind power? For New Hampshire, it’s nearly $10 million in handouts to big business. They paid that much money in 2012 so that multi-national corporations could experiment with wind power on the taxpayer dime — and yet more than $4 million of that money wound up going to companies in other states.
Subsidies extracted from shale gas would help to replace tax credits for wind and other renewables that are due to expire at the end of this calendar year. Environmentalists who favor renewables understand the problems of asking Congress for new subsidies in the current political climate. Instead, the idea is to force the fossil fuel industry to subsidize renewables—by buying its way out of onerous environmental rules that the executive branch can promulgate.
"Look, the Renewable Energy Target is - it's corporate welfare on a massive scale directed towards the renewable sector. I don't know why anyone would have any level of sympathy for businesses that - they don't employ many people, that they don't export anything and they've surreptitiously imposed these massive costs on energy consumers for the sake of lining their own profits."
Sector-wide returns have been so poor that few of the large energy-focused US private equity houses that have launched dedicated renewables funds to date are expected to offer follow-up funds. “Just 22 per cent of funds have an IRR [internal rate of return] over 3 per cent. To me 3 per cent is losing money because you have a cost of capital. Just looking at the numbers, it does not really stack up in the private equity world,” he said. Joseph Dear, chief investment officer of Calpers, the world’s sixth-largest pension fund, last year described clean-tech investment as a “noble way to lose money”, with Calpers having suffered annualised losses of 9.7 per cent in the sector.
"One risk is that other countries copy what Spain is doing," the European Wind Associaiton (EWEA) policy department told Windpower Monthly in a statement. "Already we see renewable-energy support systems being changed or threatened with change, scaring off investors in several countries," it added, citing Poland, Bulgaria and "even Germany".
Spain plans to eliminate subsidies on wind capacity installed before 2005 while assets installed between 2005 and 2008 will receive the wholesale price plus a separate remuneration that will be lower than originally promised. Analysts say nearly 40 percent of Acciona's wind installations were built before 2005. The wind sector will bear 70 percent of an estimated 2.1 billion euros of cuts to renewable energy subsidies as part of the draft measures.
In an address to the National Association of Regulatory Utility Commissioners, Senator Alexander said, “We are at a fork in the road that will determine whether our country can compete for good jobs in a 21st-century economy. The surest path toward cheap, clean, reliable energy is to end Washington’s obsession with wasteful energy subsidies and rely instead on free enterprise and government-sponsored research. “The right first step on that path is to not renew the massive wind production tax credit.
When they go shopping for renewable credits, Ameren, KCPL and Empire Electric “buy the cheapest RECs, and those always come from existing facilities,” Wilson explained. “It’s not spurring any new development in California. There is no benefit to Missouri customers.”
With the carbon tax potentially to be scrapped when the new Senate sits after July, Prime Minister Tony Abbott and other senior Coalition figures have increasingly set their sights on the mandated target for renewable energy, blaming it for forcing up power prices.
Former ABN Amro chief executive Rijkman Groenink is among a group of senior banking officials who have been handed back millions of euros by the tax office after investing in sustainable energy, the Volkskrant reported on Saturday.
Currently, public support for Energiewende is still high but the rising cost has become a growing concern, and last month the new energy minister, Sigmar Gabriel, vowed to cut subsidies for wind, solar and other renewables ...Unless the new government manages to reconcile national priorities with the dynamics of its federal system, the mood could quickly turn against Germany's green revolution.
"Our side of the aisle would like to see a markup of extenders to allow the [Senate Finance Committee] to do its work," Grassley says, adding that Wyden could put together a package by himself or with Sen. Orrin Hatch, R-Utah, that goes directly to the floor. ..."More likely than not, the Senate will take a strong look at getting extenders done, but how Camp and the House will proceed remains more uncertain."
The Spanish government said it plans to end all price subsidies for wind capacity online before end-2004, while slashing remuneration for younger capacity. ..."It is the most harmful policy dictated against wind in any country," said the AEE, which is calling for EU intervention.
Prime Minister Mariano Rajoy's Administration has killed subsidies for new plants and scaled back those for existing facilities, and this latest move will put them on a traditional rate pegged to their cost of investment.
Spain plans to set the return earned by renewable energy at 7.4 percent, moving to curb subsidies to an industry that got 50 billion euros ($68 billion) in the past decade, according to draft rules seen by Bloomberg News. Successive Spanish governments have struggled to give financial incentives to clean energy without passing on all of the costs to consumers. That built up a debt temporarily borne by utilities, though under government guarantee, potentially eroding the credit strength of both.
The IRS does not have a way to flag all firms that received a 1603 grant from the Treasury Department, opening the door to potential double-dipping. An ongoing IRS review sampled some recipients of the grant, mostly from 2009, and flagged potential issues in amended tax returns from more than half of them.
Indications are mounting, however, that green capitalism will not be able to meet all expectations. In courts around the country, complaints are mounting from wind park investors who haven't received a dividend disbursement in years or whose parks went belly up. Consumer protection activists are complaining that many projects are poorly structured and lack transparency.
UNITED STATES: President Barack Obama touched on some familiar themes in his annual State of the Union address on Tuesday, calling for an end to oil industry subsidies and urging action to reduce carbon pollution.