Senate Passes Energy Bill; Key Renewable Energy Provisions Axed

The U.S. Senate passed a watered-down version of the federal energy bill yesterday 86-8. Democratic leaders dropped key renewable energy provisions from the legislation after a cloture vote failed by one vote.

That move leaves federal support for the renewable energy industry in limbo. The vast majority of federal renewable energy tax credits where last renewed in 2006, and are due to expire at the end of 2008.

The House version of the bill originally included an extension of important credits, including the production tax credit (PTC) for renewable electricity generation and a solar investment tax credit. The Senate version that failed yesterday morning included a 2-year extension for many of these credits, but even that limited extension was axed in the final bill that passed last night.

Loss of federal tax credits could be devastating for the renewable energy sector, particularly for the wind energy and solar energy industries, which are just starting to hit their stride.

We've previously discussed the importance of these programs to the long-term stability of the industry. As other observers have noted, wind project development often grinds to a halt 6-8 months before the expiration of the PTC. Projects that haven't started construction by then risk not coming on-line in time to take advantage of the credit. If that trend holds true the wind industry could be looking at a slow-down in the next six months.

The lack of tax credits will have a similar impact on commercial solar investments outside California, according Barry Cinnamon, CEO of Akeena Solar, who was interviewed today by the San Jose Mercury News.

Senator Reid says the Senate will try to pass a tax credit extension in a separate legislative package in January. In the meantime, the oil & gas industry has walked away holding the tax bag - and the renewable energy industry is left holding its breath (again).