The Midland Cogeneration Venture in Michigan is the largest combined heat and power plant in the country. CHP is one of the clean and efficient technologies that have been excluded from the investment tax credit extension.
In December 2015, Congress passed legislation providing a five-year extension with a gradual decline of the production tax credit for wind and the investment and residential tax credits for solar. However, other technologies that currently qualify for these credits—such as fuel cells, combined heat and power (CHP), small wind, microturbines, biomass, biogas, geothermal, hydropower, and marine and hydrokinetic energy—were excluded. This is fundamentally unfair and short-sighted. Now, two bipartisan bills under consideration in Congress, H.R. 5172 and H.R. 5167, would level the playing field by providing consistent incentives for clean and efficient technologies.
The investment tax credit is crucial for the development of efficient, reliable, and resilient power supplies. Businesses and investors need stable, predictable federal tax policy to create jobs and commit capital. However, current policy not only prioritizes some sources of electricity over others, it also creates a financial cliff, jeopardizing long-term business investments. This dampens the development of clean energy technologies and the growth of industries that could fuel the future and limits choices for consumers.
One of the technologies currently at risk of losing incentives is CHP, which simultaneously generates electricity and thermal energy by recycling waste heat. These systems can double the efficiency of conventional power units while significantly lowering pollution. When configured to act in an “island mode,” independent of the grid, CHP can also provide reliable power in the event of a disruption. With CHP, energy-intensive manufacturing plants can lower their costs, and when the grid is down, hospitals can continue to deliver essential public safety and response services, and data centers can keep processing transactions.
Like CHP, the other clean and efficient technologies that have been excluded from the investment tax credit extension also provide unique value to communities and consumers. But businesses and investors that develop and support them need the market certainty that transparent, long-term, and consistent federal policies provide. For this reason, the investment tax credit should be extended for five years for all the technologies that currently qualify. It also should allow these systems—as it does for solar and wind—to access the credit at the beginning of construction, rather than requiring project completion.
Many in Congress profess support for an all-of-the-above energy strategy that avoids picking winners and losers. Now they have a chance to pass bipartisan legislation that creates parity across clean and efficient electricity-generation technologies, whether fueled by the wind, the sun, waste heat, or natural gas. Members should pass a multiyear extension of the investment tax credit to provide investors and businesses with the policy assurance they need to deploy capital, grow jobs and businesses, and ensure that consumers have energy choices. It is only the fair thing to do.
Phyllis Cuttino directs Pew’s clean energy initiative.