Examination of Federal Interventions in the Renewable Energy Market

Examination of Federal Financial Assistance in

the Renewable Energy Market

Implications and Opportunities for Commercial Deployment of

Small Modular Reactors

October, 2018

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ACKNOWLEDGMENTS

This Report was prepared pursuant to a contract with CNI Global Solutions, LLC with

funding from U.S. Department of Energy (“DOE”), Office of Nuclear Energy, Prime Contract

DE-NE0008514.

The views and assumptions described in this report are those of the authors. This

Report does not represent the views of DOE, and no official endorsement should be inferred.

The authors of this Report are Seth Kirshenberg, Richard Butterworth and Hilary

Jackler at Kutak Rock LLP and Brian Oakley and Wil Goldenberg at Scully Capital Services,

Inc. The authors gratefully acknowledge the assistance of federal government officials

working to support the small modular reactor program and the development of nuclear

power. DOE provided the resources for this Report and invaluable leadership, guidance,

and input.

In particular, the authors appreciate the leadership, support, guidance, and input

from Tim Beville, Program Manager, Small Modular Reactors Program at DOE and Tom

O’Connor, Director, Office of Advanced Reactor Deployment at DOE. Additionally, the

authors appreciate the input and guidance provided by other individuals at DOE and the

many other entities that reviewed and provided input and technical guidance on the drafts

of this Report.

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Table of Contents

Executive Summary .................................................................................................................................. ES-1

ES.1 Mandates and Incentives for Renewable Energy ........................................................... ES-1

ES.2 Project Level Effects of Financial Incentives ................................................................ ES-2

ES.3 Costs and Economic Benefits of Support Programs for Renewables ................. ES-3

ES.4 Application to SMRs ........................................................................................................... ES-7

ES.5 Next Steps............................................................................................................................ ES-10

Introduction .............................................................................................................................. 1

Overview of Mandates and Incentives for Renewable Energy ................................ 3

State Renewable Portfolio Standards ...................................................................................... 3

Energy Policy Act of 2005 ........................................................................................................... 5

Recovery Act Boost to Funding Renewable Energy Projects ............................................ 7

Energy Independence and Security Act of 2007 ................................................................. 8

Executive Orders on Renewable Energy Use by Federal Agencies ................................ 9

Department of Defense Implementation of Renewable Energy Goals ....................... 10

Department of Energy, General Services Administration and other Federal Agency

Implementation of Goals ........................................................................................................................ 12

Summary ......................................................................................................................................... 15

Project Level Effects of Financial Incentives ................................................................. 16

Financial Incentives Offered to Renewables Since 2005 .................................................. 16

Effect of Incentives on Individual Projects ............................................................................ 21

Summary ........................................................................................................................................ 25

Costs and Economic Benefits of Support Programs for Renewables .................. 26

Costs of Incentive Programs .................................................................................................... 26

Benefits of Incentive Programs ............................................................................................... 34

Summary ........................................................................................................................................ 43

Application to SMRs ........................................................................................................... 45

Evolution of the U.S. Electricity Market ................................................................................. 45

Existing Challenges Influencing U.S. Electric Supply......................................................... 47

The Market Opportunity for SMRs ......................................................................................... 50

Addressing Challenges through Federal Assistance ........................................................ 52

Summary ........................................................................................................................................ 56

Next Steps for Supporting Commercial Deployment of SMRs ............................. 57

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Appendix A: Assumptions for LCOE analyses ................................................................................... A-1

Appendix B: Tax Expenditure Calculations .......................................................................................... B-1

B.1 Wind Power .................................................................................................................................. B-1

B.2 Solar Power ............................................................................................................................... B-12

Appendix C: Analyis of Proposed SMR Assistance ........................................................................... C-1

C.1 SMRs .............................................................................................................................................. C-2

C.2 Solar ............................................................................................................................................... C-3

C.3 Wind .............................................................................................................................................. C-5

C.4 Combined .................................................................................................................................... C-6

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EXECUTIVE SUMMARY

In numerous sectors of the economy, the Federal government has utilized financial

incentives to mobilize private sector investment and advance policy objectives. The

renewable energy sector provides a highly relevant example of how financial assistance in

the form of demand mandates and financial incentives can spur industry development.

Today, renewable energy generation is transforming the power sector in many states,

challenging traditional utility business models, and in many cases displacing traditional

baseload sources during hours of peak generation.

This report introduces these incentives, discusses how they have been utilized over the past

decade to stimulate investment in the renewable energy sector, provides data on their cost

and on their effectiveness in meeting policy objectives, and offers observations on how Small

Modular Nuclear Reactors (SMRs) could benefit from similar forms of government support.

ES.1 MANDATES AND INCENTIVES FOR RENEWABLE ENERGY

For decades, multiple Presidential Administrations attempted to promote the use of

renewable energy such as solar and wind. Such use had been limited by the higher cost of

renewables due to the lack of demand and technology development and the failure of

commercial markets to accept the technologies. While several Presidents were able to

establish renewable energy goals and policies, it was not until the period following the

passage of the Energy Policy Act of 2005 (EPAct or the Act) that significant renewable

penetration was achieved in the U.S. power sector. This market penetration can be attributed

to several factors:

• State-imposed standards to increase the use of renewable energy (Renewable

Portfolio Standards or RPS);

• Federal policies, mandates, and incentives enacted by EPAct and subsequent

legislation; and

• Executive Orders and Agency actions supporting the purchase of renewable energy.

Collectively, these measures created a multipronged approach that encouraged utilities to

enter into long-term renewable power purchase agreements with project developers, drove

down the cost of renewable energy through Federal tax and credit incentives, and harnessed

the purchasing power of the Federal government.

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ES.2 PROJECT LEVEL EFFECTS OF FINANCIAL INCENTIVES

The financial incentives introduced by EPAct and subsequent legislation addressed several

financing challenges being faced at the time: first, renewable energy projects had a limited

track record of commercial deployment, particularly with the newer technologies being

introduced at the time; and second, for several years the financial markets were recovering

from the 2008-2009 economic downturn, limiting the availability of low cost, long term debt.

The financing tools introduced by the Federal government made renewable energy projects

financially feasible.

The financial incentives introduced or extended by EPAct and subsequent legislation can be

broadly categorized into two types: tax-based incentives and credit-based incentives.

ES.2.1 Tax-Based Incentives

Tax-based incentives offer the benefit of being relatively easy to introduce and administer.

Once enacted, investors will realize the value of tax incentives by claiming credits or

deductions on their tax filings. The tax incentives utilized in the renewable sector include:

• Investment Tax Credits (ITCs): ITCs give a business a tax credit for a specified

percentage of capital expenditures for qualifying energy projects. ITCs are an

investment-based subsidy as they provide upfront financial support for the

construction of a project which is expected to deliver a specified good or service in

the future (renewable energy in this case).

• 1603 Cash Grants: The Federal government briefly offered cash grants to developers

of renewable energy projects as an alternative to ITCs in response to a decline in tax

equity financing during the 2008-2009 economic downturn which reduced the

number of investors interested in tax credits. Section 1603 of ARRA offered cash

payments to developers equal to, and in lieu of, the existing ITC (30% of qualifying

investment). This allowed developers to receive a benefit equivalent to the ITC

without relying on a tax equity investor.

• Production Tax Credits (PTCs): PTCs give a taxpaying entity a tax credit for power

output, in terms of a fixed dollar amount per unit of output. A PTC can thus be

considered a form of results-based subsidy, in that it is only paid out when the

intended product (renewable energy in this case) is delivered.

• Accelerated Depreciation: Accelerated depreciation—formally Modified Accelerated

Cost Recovery System (MACRS)—is a way for businesses to realize higher

Results-based subsidies, also commonly referred to as results-based financing (RBF) in international development, have been used to

support investment in renewables and other infrastructure. https://openknowledge.worldbank.org/handle/10986/17481

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depreciation expenses, and in turn, lower tax liabilities, earlier in the life of an asset

while still incurring the same total depreciation.

ES.2.2 Credit-Based Incentives

Credit-based incentives provide low cost, long-term debt financing at terms that are

unavailable in the private capital markets. Section 1703 of EPAct established the DOE’s loan

program targeted at projects employing innovative technology. Under the program, DOE

provides a direct loan through the Federal Financing Bank (FFB), which serves as the lender.

FFB charges interest slightly above U.S. Treasury rates. DOE then guarantees 100% of the

FFB loan. Alternatively, DOE guarantees loans provided by commercial lenders. DOE’s

guarantee amount is capped at 80% of principal for a given loan, thus requiring the lender

to hold at least 20% of the credit exposure.

Collectively, tax and credit incentives help to reduce the cost of power from different

generation technologies, thus enhancing their competitiveness against other power sources.

Tax credits, accelerated depreciation, and credit support enable significant cost reductions

when applied together, and enable power to be purchased by customers at a lower price.

The combination of tax credits, accelerated depreciation, and credit support is estimated to

reduce the cost of power by 48% for solar power, and 35% for wind.

ES.3 COSTS AND ECONOMIC BENEFITS OF SUPPORT PROGRAMS FOR RENEWABLES

Growth in the solar and wind power industries was supported by a combination of Federal

spending on supply-side incentives (tax incentives, credit support, and R&D), and demand

mandates by the Federal and state governments. To quantify the cost of incentive programs,

this report examines the revenue loss associated with tax incentives, the appropriated credit

subsidy associated with credit incentives, and the direct spending associated with research

and development initiatives. This report does not attempt to quantify the cost of demand

mandates implemented at the Federal and state level.

As illustrated in Exhibit ES-1, based on a review of incentives for solar and wind from 2005

to 2015, it is estimated that the Federal government spent $51.2 billion, with tax incentives

accounting for 90% of the total.

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Exhibit ES-1 Total Incentives for Wind and Solar

ES.3.1 Tax-Based Incentives

The cost of tax-based incentives is defined as the amount of tax revenue the Federal

government abates through special tax credits and other incentives which reduce tax

obligations. The Federal government spent a total of $45.8 billion on tax incentives for solar

and wind from 2005 to 2015. Of this, production tax credits comprised 46.4%, or $21.3 billion.

Spending on 1603 Cash Grants comprised $20.4 billion, or 44.5% of the total. This was

followed by investment tax credits at $2.4 billion, or $5.13% of the total; it is worth noting

that 1603 Cash Grants were effectively a substitute for ITCs, so investment-based subsidies

were in fact very large if ITCs and 1603 Cash Grants are considered together. Lastly, MACRS

incentives were worth $1.8 billion, or 3.97% of the total. This is summarized in Exhibit ES-2.

Based on Scully Capital analysis discussed throughout this section.

Chart shows $51.1 billion instead of $51.2 B of total incentives; slight difference due to rounding.

Tax Incentives $45.8 B

(90%)

Credit Incentives $1.3 B (2%)

R&D Grants $4 B

(8%)

Total Incentives:

$51.2 Billion

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Exhibit ES-2: Summary of Tax-Based Incentives in 2015 Billions of U.S. Dollars

ES.3.2 Credit-Based Incentives

The Federal government offered significant credit support in the form of loans and loan

guarantees for wind and solar through DOE’s lending authority. As depicted in Exhibit ES-

3, DOE provided $11.7 billion in credit assistance to 3,808 MW of solar and wind projects.

Although the loans supported by DOE totaled $11.7 billion, the appropriated subsidy costs

were only $1.3 billion, reflecting the use of credit subsidy in budgeting.

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(2015 $B)

PTC

1603 Cash Grant

MACRS

ITC

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Exhibit ES-3: LPO Credit Incentive Spending for Wind and Solar

Finally, supplementing the financial support through tax and credit incentives was R&D

spending. R&D investment in solar power totaled $3.2 billion from 2005 to 2015 and totaled

$880 million for wind power over same period.

ES.3.3 Benefits of Incentive Programs

While the Federal government’s $51.2 billion investment in solar and wind represents a large

commitment, the impact on the industry and U.S. generation mix has been significant.

Strong government support resulted in meaningful growth in generation capacity and

power production for solar and wind, and stimulated related employment.

The incentive programs sparked growth in the solar and wind power industries. Deployment

of solar and generation capacity, and the resulting electricity, have grown sharply since 2005.

From 2005 to 2015, solar capacity grew by 77,794 MW and wind capacity grew by 446,548

MW. This also facilitated growth of employment in solar and wind jobs, such that those

industries are expected to provide the two fastest growing occupations through 2026. Both

industries make strong contributions to the wider economy, including stimulating growth in

other sectors and making significant tax payments. Power production has become more

efficient, and costs have fallen, for both technologies.

Government Accountability Office, “DOE Loan Programs: Current Estimated Net Costs…,” April 2015.

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ES.4 APPLICATION TO SMRS

Electric utilities in the United States currently operate in a rapidly evolving market

environment which has challenged conventional notions of how electric power is generated

and delivered to customers, presenting uncertainty for electric utilities facing long-term

investment decisions. Nevertheless, capital will continue to be deployed in power production

assets that can reliably provide energy, capacity, and flexibility. As the nation’s traditional

baseload generation assets, largely consisting of large coal and nuclear power plants, are

phased out, utilities will seek opportunities to replace these assets with more resilient energy

systems that recognize the long-term impacts of distributed energy resources (DERs) while

at the same time provide for safe, reliable, and resilient performance over the long term.

Rising use and affordability of renewables, and significant retirements of coal and nuclear

generation assets raise fundamental questions about what kind of generation is needed on

the grid. While the power market may not require the levels of baseload generation

prevalent decades ago, the grid is not ready to be free of baseload entirely. Furthermore,

the North American Electric Reliability Corporation (NERC) indicated in its 2017 Long-Term

Reliability Assessment that fuel assurance is a significant concern in planning for adequate

reserve margins, especially for markets with high renewable penetration and significant

reliance on natural gas.

The current trends in the electric power sector present opportunities for SMR development

as a flexible, carbon-free baseload generation resource which can be built on a smaller scale

than traditional nuclear plants. In order to capture the benefits, as a new and complex

technology, SMRs will have to address several challenges to commercial deployment,

including:

• Development of Manufacturing Ecosystem;

• Licensing Risk;

• Development Timeline;

• First of a Kind (FOAK) Costs; and

• Uncertainty in Long-Term Energy Markets.

Federal financial assistance can help address these challenges. Tax and credit incentives

clearly contribute to significant reductions in the cost of electricity while demand mandates

assure off-take at predictable prices. Such incentives could also potentially be applied to

North American Electric Reliability Corporation, “2017 Long-Term Reliability Assessment,” March 2018.

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support the development of SMRs. Exhibit ES-4 illustrates SMR Start’s estimate of the

potential savings to an SMR’s LCOE based on the application of tax and credit incentives.

Exhibit ES-4: LCOE of SMR

SMR Start estimates that allowing SMRs to receive PTCs would reduce the cost of power

by just under 1¢ per kWh. Credit incentives (loan guarantees) are estimated to reduce the

cost of power by another 0.3¢. State and local tax incentives, such as sales and use tax

exemptions and property tax abatements, could further reduce costs by 0.5¢. Altogether,

these would reduce the cost of power by 22%.

To meaningfully impact commercial deployment, these incentives would need to be applied

to several SMRs in combination with demand mandates to assure off-take. Construction of

6 GW of SMR capacity by 2035 would comprise about 5% of total capacity additions through

that year. This would amount to 15 SMR projects with capacity of 400 MW each. The total

cost to the Federal government of supporting 15 such SMR project with PTCs and DOE credit

SMR Start, “The Economics of Small Modular Reactors,” September 14, 2017.

IBID

SMR LCOE

After

Incentives

Cost of Power (¢/kWh)

SMR

Baseline

LCOE

7.8¢

0.9¢

0.5¢

0.3¢

PTC

State and

Local Tax

Incentives

DOE

Credit

Support

6.1¢

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support is estimated to cost approximately $10 billion. While this level of support is

significant relative to the capacity deployed, the high capacity factors and long operating

lives of SMRs support an attractive return on the government’s investment. Specifically, the

$10 billion assistance estimate equates to approximately $0.0034/kWh. By comparison, the

investments in wind and solar equaled approximately $0.0108/kWh.

This comparison is

presented in Exhibit ES-5.

Exhibit ES-5: Investment to Support SMR Generation

As illustrated above, when viewed in terms of spending per unit of power produced (cents

per kWh), the proposed support for SMRs compares favorably against the historic support

for solar or wind. This is because SMRs are expected to realize capacity factors of 92.1% or

above and have very long operating lives. Nevertheless, important questions remain

regarding the cost of commercially deploying SMRs and whether 6 GW of induced capacity

Scully Capital calculations, see Appendix C.

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would be sufficient to develop the industrial capabilities necessary to support the industry

over the long-term.

ES.5 NEXT STEPS

Given recent retirements of coal and conventional nuclear plants, and significant retirements

expected in coming years, an opportunity exists for SMRs to enter the market and

meaningfully contribute to the country’s need for energy security and energy resilience.

However, SMRs face significant challenges in commercial deployment, including the need

to develop a manufacturing ecosystem for a new technology, significant work remaining to

license and develop a working generation facility, and costs which may be high relative to

other energy sources in the competitive and quickly evolving power markets.

The success of Federal financial incentives for renewables presents a promising model of

financial support for power project development, which could be applied to other innovative

power technologies, including SMRs. Federal expenditure for SMRs could be impactful even

if on a smaller scale than the $51 billion spent on solar and wind from 2005 to 2015.

The Federal government has made progress supporting SMR development with Federal

incentives. DOE currently has an open solicitation for loan guarantees for nuclear projects

including SMRs.

Congress also voted to extend nuclear PTCs passed the planned expiration

in 2020, which would enable projects completed after 2020 to benefit from them.

While

those actions could be helpful for SMRs, other steps could further help SMRs to

commercialization:

• Examine Potential Market Associated with SMRs: In order to establish a business case

for Federal financial assistance, the potential of SMRs as a source of power generation

and as a commercial enterprise should be analyzed, and if possible, quantified. This

should include consideration of financial, legal, regulatory, and technical issues

related to SMRs’ integration into the power system, including consideration of the

entire value chain, cost competitiveness, and other matters. The objective of this

undertaking would be fourfold:

‒

Confirm the suitability of SMRs to address the baseload power replacements

which will be driven by coal and conventional nuclear retirements;

‒

Identify how the SMR supply chain will need to develop in order to achieve

the n

-of-a-kind cost targets;

https://www.energy.gov/lpo/advanced-nuclear-energy-projects-solicitation

https://www.nei.org/news/2018/congress-passes-nuclear-production-tax-credit

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‒

Validate or refine the 6 GW estimate of SMR commercial deployments

required to establish SMRs as a viable baseload option; and

‒

Develop an order of magnitude estimate of technology export value based on

the U.S. experience with conventional nuclear power plants.

• Create Project-Level Business Case: Analyses of the impact of financial incentives have

focused on LCOE, which is a useful metric for comparing costs of different

technologies or considering an indicative project. To further DOE’s understanding, a

project-level business case that contemplates the site-specific costs, load profiles, and

financial structure is warranted. This feasibility analysis would seek to identify the cost

of service of a proposed SMR and would measure the impact of incentives and the

uncertainties that could increase costs, identify key risks and mitigants, and integrate

financial, legal, regulatory, and technical considerations.

While the analysis could draw upon conceptual design data, site-specific costs,

infrastructure requirements and customers would be examined with the objective of

refining DOE’s understanding of the financial feasibility of one or two “first movers.”

Additionally, the analysis would consider the host utility’s ownership, the proposed

credit structure of the project and the economic objectives and constraints of the

host utility’s customer base. This effort would result is assessment the opportunities

and challenges to SMR commercial deployment and would inform the design of

incentives around specific market conditions and other constraints.

• Identify Obstacles that Require Legislative Action: Enhancing Federal support for SMRs

will require Congress to pass legislation. To facilitate the eventual enactment of new

incentives, key initiatives should be identified for development into law. This would

be informed by the findings of the project-level business case analysis, and could

focus on matters such as identifying appropriate existing legal authorities for

supporting Federal power purchase agreements, finding ways to modify or extend

existing incentives, creating budget scoring alternatives or developing roadmaps for

implementing new programs or legislation.

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INTRODUCTION

In numerous sectors of the economy, the Federal government has utilized financial

incentives to mobilize private sector investment and advance policy objectives. The

renewable energy sector provides a highly relevant example of how financial assistance in

the form of demand mandates and financial incentives can spur industry development.

Today, renewable energy generation is transforming the power sector in many states,

challenging traditional utility business models, and in many cases displacing traditional

baseload sources during hours of peak generation.

Over the next 20 years, the United States is expected to encounter challenges in providing

adequate supply of baseload power as some of the country’s coal-fired power plants and

nuclear generation stations are retired. The estimated electricity output from coal and to a

limited extent nuclear sources is expected to decline significantly due to regulatory drivers,

changes in state and Federal energy policy and competition from low cost sources such as

natural gas.

Further, integration of growing power supply from intermittent renewable

power sources requires adequate supply of steady power to balance renewables when their

power production is lower due to variation in intermittent resources.

The development and construction of new baseload power plants, like Small Modular

Reactors (SMRs), represents a highly uncertain endeavor. Investment in additional

generation requires consideration of customers’ long-term demand for power, existing and

future regulations, competing alternatives, and changes in market dynamics. Despite the

uncertainties, large-scale baseload power plants will need to be developed, designed, and

constructed to replace an

aging fleet consisting largely of coal and nuclear generation.

These challenges are likely to remain in the near term. However, government financial

incentives could be utilized to encourage investment in targeted sectors and technologies.

Previous analyses sponsored by the Department of Energy (DOE) have examined how the

Federal government can support SMR investment in its capacity as power purchaser.

13,14

Government incentives can take other forms such as direct grants, tax incentives, credit

incentives, and demand mandates. This report introduces these incentives, discusses how

U.S. Energy Information, “Annual Energy Outlook 2018: Table: Electricity Generating Capacity,”

https://www.eia.gov/outlooks/aeo/data/browser/#/?id=9-AEO2018&cases=ref2018&sourcekey=0, referenced April 27, 2018. Cited data is

for the Reference Case.

Department of Energy, “Staff Report on Electricity Markets and Reliability,” August 2017.

Kutak Rock, LLP, and Scully Capital Services Inc., “Small Modular Reactors: Adding to Resilience at Federal Facilities,” published by U.S.

Department of Energy, December 2017.

Kutak Rock, LLP, and Scully Capital Services Inc., “Purchasing Power Produced by Small Modular Reactors: Federal Agency Options,”

published by U.S. Department of Energy, January 2017.

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they have been utilized over the past decade to stimulate investment in the renewable

energy sector, provides data on their cost and on their effectiveness in meeting policy

objectives, and offers observations on how SMRs could benefit from similar forms of

government support.

This report is organized as follows:

• Overview of Mandates and Incentives for Renewable Energy: This chapter provides a

comprehensive overview of the multi-pronged strategy employed at the Federal and

state level to drive the renewable energy market.

• Project Level Effects of Financial Incentives: This chapter describes the purpose and

structure of financial incentives. Also, this section explores how incentives reduce the

cost of power, and estimates the effect of Federal tax and credit incentives on

indicative solar and wind power projects in terms of the levelized cost of electricity

(LCOE).

• Costs and Economic Benefits of Support Programs for Renewables: This chapter

describes spending on renewable support and growth in installed renewable power

capacity since 2005, and the resulting benefits in terms of power outputs, jobs, and

other areas.

• Application to SMRs: This chapter provides an overview of current U.S. electric market

conditions and how it has evolved over time, describes how SMRs can address

emerging concerns in the power sector, and proposes models of incentives to

support SMR commercial deployment.

• Next Steps for Supporting Commercial Deployment of SMRs: This chapter provides

recommendations for developing and implementing incentive programs for SMR

commercialization.

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OVERVIEW OF MANDATES AND

INCENTIVES FOR RENEWABLE ENERGY

For decades, multiple Presidential Administrations attempted to promote the use of

renewable energy such as solar and wind. Such use had been limited by the high cost of

renewables due to the lack of demand and technology development and the failure of the

commercial market to accept the technologies.

While several Presidents were able to establish renewable energy goals and policies, it was

not until the period following the passage of the Energy Policy Act of 2005 (EPAct or the

Act) that significant renewable penetration was achieved in the U.S. power sector. This

market penetration can be attributed to several factors:

• State-imposed standards to increase the use of renewable energy (Renewable

Portfolio Standards or RPS);

• Federal policies, mandates, and incentives enacted by EPAct and subsequent

legislation; and

• Executive Orders and Agency actions supporting the purchase of renewable energy.

Collectively, these measures created a multipronged approach that encouraged utilities to

enter into long-term renewable power purchase agreements with renewable project

developers, drove down the cost of renewable energy through state and Federal tax and

credit incentives, and harnessed the purchasing power of the Federal government. These

actions increased the demand for renewable energy, while at the same time lowered costs

through financial incentives, increasing the supply of competitive renewable power. The

Federal government has also supported research and development (R&D) for renewable

generation technologies.

This section details the state and Federal incentives that supported the development of

renewable energy projects during the period following the passage of EPAct and highlights

how these policies worked together to significantly expand renewables in the U.S. energy

markets.

STATE RENEWABLE PORTFOLIO STANDARDS

As states have become increasingly concerned about climate change and reducing pollution,

they have enacted Renewable Portfolio Standards (RPS). An RPS is a requirement that retail

electricity suppliers procure a certain minimum quantity of eligible renewable energy or

capacity, measured in either absolute units (kWh or kW), or as a percentage share of retail

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sales. RPS policies are generally designed to maintain and/or increase the contribution of

renewable energy to the electricity supply mix. RPS programs often utilize tradable

renewable energy certificates (RECs) to increase the flexibility and reduce the cost of

compliance with the purchase mandate, and to facilitate a purely financial product that can

be traded separately from the underlying electricity generation. These actions have created

a relatively stable market for the purchase and sale of RECs, enhancing their value in a

number of state markets. REC transactions create a supplemental revenue stream for

renewable generators and allow retail suppliers to demonstrate compliance with the RPS by

purchasing RECs in lieu of directly purchasing renewable electricity.

The concept of RPS was developed in California in 1995, although not implemented there

until 2003; other states began enacting RPS in the late 1990s. As of November 2015, 29

states and the District of Columbia have RPS mandates, as shown in Exhibit 2-1.

Exhibit 2-1: States with RPS

RPS mandates created strong demand for renewable power. It is estimated that 58% of all

renewable capacity in the U.S. installed from 1998 to 2014 is being used to meet RPS targets

(excluding hydropower).

RPS mandates require that at least 8% of the U.S. power supply

Wiser et al, “A Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards,” published by National

Renewable Energy Laboratory, January 2016.

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will be met by renewables in 2025, equivalent to 106 GW of capacity.

From 2010-2013,

wholesale power buyers (generally utilities) tended to pay a premium (under long-term

power purchase agreements) over prevailing “brown power” rates, as high as 4.8¢ per kWh

for some utilities, to purchase renewables for RPS purposes over other generation options.

The incremental cost of complying with RPS, net of the avoided cost of alternative

generation, ranged from 2% to 4% of retail rates in eight states, and was below 2% in 17

states.

ENERGY POLICY ACT OF 2005

The Federal government’s effort to increase the use of energy from renewable sources

began in earnest with the requirements included in EPAct.

Given high oil and natural gas

prices that prevailed around 2001, the Bush Administration supported policies which

targeted the development of a long-term, comprehensive strategy to lessen the impact of

energy price volatility and supply uncertainty. This led to several years of policy discussion

around “energy security” as a national priority. In 2005, the U.S. Congress enacted the EPAct,

which reflected the Administration’s goals by creating programs and policies aimed at

increasing and diversifying domestic energy production. EPAct included key provisions to

help diversify domestic energy production through the development of new sources of fuel

and electricity supply. This included incentives for nuclear power plants, coal, and

renewables.

For renewable energy, EPAct included financial incentives, which were later enhanced in

subsequent legislation and demand mandates related to the energy consumption by Federal

facilities. Tax incentives, which are examined in the following section, included production

tax credits, investment tax credits, and accelerated depreciation treatment for qualifying

renewable energy projects. Also, EPAct set specific renewable energy purchase targets for

all Federal agencies:

• 3% of all electricity by 2007;

• 5% by 2010; and

Wiser et al, “A Retrospective Analysis of the Benefits and Impacts of U.S. Renewable Portfolio Standards,” published by National

Renewable Energy Laboratory, January 2016.

Heeter at al, “A Survey of State-Level Cost and Benefit Estimates of Renewable Portfolio Standards,” published by National Renewable

Energy Laboratory, May 2014.

Energy Policy Act of 2005

, Pub.L. 109-58, Aug. 8, 2005, 42 U.S.C. §§ 13201, et. seq.

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• 7.5% by 2013.

The Administrator of General Services (GSA) was required to establish a photovoltaic

purchasing program for the acquisition and installation of solar electric systems for new and

existing buildings.

DOE was authorized to establish a renewable energy rebate for the

installation of renewable energy systems in residential and small business properties.

And

the Secretary of Interior (DOI) was directed to approve non-hydropower renewable energy

projects located on public lands with a generation capacity of at least 10,000 megawatts of

electricity by 2015.

The goals included in EPAct were intensified by Congress as applied to the Department of

Defense (DoD) in the 2007 National Defense Authorization Act (NDAA), which required DoD

to “produce or procure not less than 25 percent of the total quantity of electric energy it

consumes within its facilities and in its activities during fiscal year 2025 and each fiscal year

thereafter from renewable energy sources” and “to produce or procure electric energy from

renewable energy sources whenever the use of such renewable energy sources is consistent

with the energy performance goals and energy performance plan for the Department.”

Section 1703 of Title XVII of EPAct of 2005 created the DOE’s Loan Guarantee Program.

Under Section 1703, DOE is authorized to issue loan guarantees for projects with high

technology risks that "avoid, reduce or sequester air pollutants or anthropogenic emissions

of greenhouse gases; and employ new or significantly improved technologies as compared

to commercial technologies in service in the United States at the time the guarantee is

issued." Loan guarantees are intended to encourage early commercial use of new or

significantly improved technologies in energy projects. The loan guarantee program

generally does not support research and development projects. During the Obama

Administration, DOE issued new supplemental guidance for Renewable Energy and Efficient

Energy (REEE) projects that added $500 million of loan guarantee authority, making the total

available approximately $4.5 billion.

The loan guarantee program was reauthorized and revised by the American Recovery and

Reinvestment Act (ARRA) of 2009 by adding Section 1705 to EPAct. The 1705 Program was

retired in September 2011, and loan guarantees are no longer available under that authority.

Section 203 of EPAct, 42 U.S.C. § 15852.

Section 204 of EPAct, 40 U.S.C. § 3177.

Section 206(c) of EPAct, 42 U.S.C. § 15853.

Section 211 of EPAct.

National Defense Authorization Act of 2007

, October 17, 2006, Pub.L. 109-364, § 2852.

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DOE, however, still has authority to issue loan guarantees under the old Section 1703

Program.

RECOVERY ACT BOOST TO FUNDING RENEWABLE ENERGY PROJECTS

Nearly 10% of the ARRA

, which included over $787 billion in economic stimulus measures,

focused on funding and tax credits for green-energy related projects including renewables,

energy efficiency, transmission, and weatherization. No funding was provided for nuclear

related programs.

In 2009, ARRA significantly increased Federal investment and spending on renewable

energy. ARRA included $16.8 billion for the DOE’s Office of Energy Efficiency and Renewable

Energy (EERE). The funding was a nearly tenfold increase for EERE, which received $1.7 billion

in fiscal year 2008. The bulk of the new EERE funding supported direct grants and rebates

while $2.5 billion supported EERE's applied research, development, and deployment

activities, mainly for renewable technologies.

ARRA also provided $3.2 billion in block grants to assist local governments in implementing

energy efficiency and conservation programs authorized under subtitle E of title V of the

Energy Independence and Security Act of 2007

. These funds could be used for a number

of activities, including establishing financial incentive programs for energy efficiency

improvements (e.g., loan programs, rebate programs, waive permit fees); developing,

implementing, or installing on or in any government building onsite renewable energy

technology that generates electricity from renewable resources (solar and wind energy, fuel

cells, and biomass); implementing energy distribution technologies; and

purchasing/implementing technologies to reduce and capture methane and other

greenhouse gases generated by landfills or similar sources.

ARRA included a $3.1 billion appropriation to DOE’s State Energy Program (SEP) authorized

under part D of title III of the Energy Policy and Conservation Act (42 U.S.C. 6321). SEP dollars

are used to provide grants and funding to state energy offices for energy efficiency and

renewable energy programs. The Act also appropriated $6 billion for the cost of guaranteed

loans authorized by section 1705 of the Energy Policy Act of 2005, as noted above. The Act

authorized the DOE Loan Guarantee Program for projects that involved renewable energy,

electric transmission, or leading-edge biofuel technologies. The $6 billion in appropriated

funds was expected to support more than $60 billion in loans for these projects.

Pub. L. 111-5, February 17, 2009; 123 Stat. 115.

Included in the $2.5 billion were $800 million for projects related to biomass and $400 million for geothermal activities and projects.

42 U.S.C. 17151, et seq.

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Through ARRA, Congress provided $280 million for the military departments, of which $100

million was for energy conservation and alternative energy projects. $120 million was

allocated for the Energy Conservation Investment Program (ECIP). ECIP improves the energy

and water efficiency of existing Military Services' facilities, promoting energy conservation

and investment in renewable energy resources including wind, solar, geothermal, waste-to-

energy, and biomass at U.S. military installations.

In addition to these direct appropriations, ARRA also provided tax incentives supportive of

renewable energy uses. For example, the creation of a 30% tax credit for certain investments

with respect to qualifying advanced energy products, including manufacturing facilities for

the production of renewable energy products, electric grids to support the transmission of

intermittent sources of renewable energy, and property designed to refine or blend

renewable fuels or to produce energy conservation technologies. ARRA also extended and

expanded credits available to qualified facilities producing energy from renewable resources,

credits worth approximately $13 billion. Income tax credits for the production of electricity

from qualified energy resources were also included. The qualified energy resources were

comprised of wind, closed loop biomass, open loop biomass, geothermal energy, solar

energy, small irrigation power, municipal solid waste, qualified hydropower production, and

marine and hydrokinetic renewable energy.

ARRA also provided incentives to residential energy users by extending a credit of 30% for

residential solar electric, solar water heating, small wind energy and geothermal heat pump

property expenditures, and removing previous caps on residential solar electric, solar water

heating, small wind energy, and geothermal heat pump property expenditures.

ENERGY INDEPENDENCE AND SECURITY ACT OF 2007

The Energy Independence and Security Act of 2007 (EISA) built on many of the policy

objectives and goals included in EPAct.

For example, Section 431 established new energy

reduction goals for Federal facilities, increasing each year up to 30% reduction by 2015.

Section 432 established energy management scorecards for Federal agencies and required

metering and other evaluative tools in order to identify and implement energy and water

efficiency projects, and to establish benchmarks for all metered buildings in the Federal

inventory. Section 433 required all new Federal buildings, or buildings undergoing major

modernizations (those requiring GSA to submit a prospectus to Congress or over $2.5

million) to reduce fossil fuel use compared to a similar building use in FY 2003. The

percentage reduction in fossil fuel use was set at 55% for 2010 and increased to 100% by

Energy Independence and Security Act of 2007. Pub. L. No. 110-140. 121 Stat. 1492 (2007).

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2030. Within 3 years of enactment of EISA, as provided in Section 435, Federal agencies

were prohibited from executing any lease with the private sector for space that had not

earned an EnergyStar label. Title V of EISA included a number of provisions to encourage

the use of ESPCs, which had been authorized in EPAct, by addressing policy or procedural

obstacles that had been encountered by Federal agencies in implementing the authority.

EXECUTIVE ORDERS ON RENEWABLE ENERGY USE BY FEDERAL AGENCIES

President Bush, by Executive Order (E.O.) in 2007, required Federal agencies to reduce their

energy usage by 30% by 2015, and ensure that at least half of their renewable goals under

EPAct were achieved using new renewable sources, located on Federal agency property to

the extent feasible.

Later that same year, Congress passed the Energy Independence and

Security Act (EISA), which required all new Federal buildings and all Federal buildings

undergoing major renovation to reduce fossil fuel-generated energy consumption, as

compared to 2003 usage by similar buildings, by 55% by 2010, 65% by 2015, 80% by 2020,

90% by 2025, and 100% by 2030.

Federal agencies were also required, where lifecycle

cost-effective, as compared to other reasonably available technologies, to ensure that not

less than 30% of the hot water demand for each new Federal building or Federal building

undergoing a major renovation be met through the installation and use of solar hot water

heaters.

President Bush also signed E.O. 13514, Federal Leadership in Environmental, Energy and

Economic Performance, which encouraged Federal agencies to increase the use of

renewable energy and to implement renewable energy generation projects on agency

property.

Following up on that executive order, President Obama issued a Presidential

Memorandum in 2011, requiring Federal agencies to implement all energy conservation

measures in Federal buildings with a payback time of less than 10 years.

President Obama

also established a 2 year goal for all Federal agencies to enter into a minimum of $2 billion

in performance-based contracts, primarily through the ESPC and UESC contracts that had

been authorized in EPAct.

E.O. 13423, January 26, 2007.

Energy Information and Security Act

, Pub.L. 110-140, December 19, 2007, Section 433, 42 U.S.C. § 6834(a)(3).

Section 523 of EISA, 42 U.S.C. 6834(a)(3)(A)(iii).

E.O. 13514, October 8, 2009, Section 2(a)(ii) and (f).

Presidential Memorandum,

Implementation of Energy Savings Projects and Performance-Based Contracting for Energy Savings

December 2, 2011.

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President Obama, on December 5, 2013, signed a Presidential Memorandum directing the

Federal government to consume 20% of its electricity from renewable sources by 2020, more

than double the then current level of about 7% renewable energy use.

The Presidential

Memorandum implemented the goal the President outlined in his June 2013 Climate Action

Plan that challenged Federal agencies to more than double their renewable electricity

consumption by 2020.

As part of this effort, agencies were encouraged to identify formerly

contaminated lands, landfills, and mine sites to target for renewable energy projects,

providing valuable opportunities to return those lands to productive use. To improve

agencies' ability to manage energy consumption and reduce costs, the Memorandum directs

them to use Green Button, a tool developed by industry in response to a White House call-

to-action that provides utility customers easy and secure access to their energy usage

information in a consumer-friendly format.

President Obama then doubled the original $2 billion goal for performance-based

contracting by the Federal agencies to $4 billion total.

In 2015, President Obama launched the Clean Energy Investment Initiative through DOE.

The initiative set a goal of catalyzing $2 billion in private sector investment in solutions to

climate change, particularly through the development of low-carbon energy technologies.

By June of that same year, the President announced that the objective had already reached

more than $4 billion in commitments, over double the initial goal.

Before leaving office,

President Obama announced that the goal had been exceeded as a result of Federal agency

initiatives.

DEPARTMENT OF DEFENSE IMPLEMENTATION OF RENEWABLE ENERGY GOALS

In addition to goals established by statute and executive order, additional renewable energy

goals have been established by Federal agency policies. For example, in 2012, President

Obama directed DoD to install 3 GWs of renewable energy capacity on or around its bases

by 2025. This directive was built on a commitment President Obama made during the State

Presidential Memorandum,

Federal Leadership on Energy Management

, December 5, 2013.

https://obamawhitehouse.archives.gov/sites/default/files/image/president27sclimateactionplan.pdf

See, https://obamawhitehouse.archives.gov/the-press-office/2014/05/09/fact-sheet-president-obama-announces-commitments-and-

executive-actions-a; https://obamawhitehouse.archives.gov/blog/2014/05/09/leading-example-reduce-carbon-pollution-and-waste-

less-energy

Presidential Memoranda,

Fact Sheet: Obama Administration Announces More Than $4 billion in Private Sector Commitments and Executive Actions to Scale up

Investment in Clean Energy Innovation

, June 16, 2015.

https://obamawhitehouse.archives.gov/blog/2016/12/28/Federal-government-exceeds-goal-renewable-energy-and-energy-efficiency-

investments

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of the Union that year to develop 1 GW of renewable energy on Navy installations by 2020.

As a result, the Air Force established a goal of obtaining 1 GW by 2016 and the Army set a

goal of obtaining 1 GW of capacity by 2025.

In order to implement these renewable energy goals, DoD’s Office of the Assistant Secretary

of Operational Energy Plans and Programs was established to coordinate energy issues in

2010. In 2011, DoD published its Operational Energy Strategy to set the overall direction for

operational energy security for the agency.

DoD and DOE published a Memorandum of

Understanding (MOU) in July 2010, to facilitate cooperation to accelerate the research,

development, and deployment of energy efficiency and renewable energy technologies.

Each of the services also established new energy offices in order to carry out the renewable

energy objectives. In 2009, the Army issued the Army Energy Security Implementation

Strategy, which requires at least five installations meet “net-zero” energy goals by 2020 and

deploy 1 GW of renewable energy on their installations by 2025.

In 2011, the Secretary of

the Army established the Energy Initiatives Office Task Force (EITF) as a part of the Office of

the Assistant Secretary of the Army for Installations, Energy and Environment (ASA IE&E).

The EITF served as the central managing office for the development of large-scale Army

renewable energy projects intended to help the Army achieve the previously established

goals. In 2014 the EITF became an enduring organization, the Office of Energy Initiatives

(OEI), which now serves as the central management office for implementing large-scale

renewable and alternative energy projects.

The Deputy Assistant Secretary of the Navy (Energy) office was established in March 2010,

in order to develop and oversee Department of the Navy policy on matters pertaining to

operational and shore energy initiatives for the Secretary of the Navy. In 2012, the Navy

issued its Strategy for Renewable Energy to guide the Department of the Navy in

accomplishing two of the energy goals established in 2009: to obtain half of the

Department’s energy from alternative sources; and to produce at least half the shore-based

energy requirements from renewable sources, such as solar, wind, and geothermal by

2020.

See https://obamawhitehouse.archives.gov/the-press-office/2012/04/11/fact-sheet-obama-administration-announces-additional-

steps-increase-ener

The 2011 Report, and annual reports thereafter, can be found at https://www.acq.osd.mil/eie/OE/OE_library.html

See https://www.acq.osd.mil/dpap/cpic/cp/docs/Memorandum_of_Agreement_with_DoE.pdf

http://www.asaie.army.mil/Public/Partnerships/doc/AESIS_13JAN09_Approved%204-03-09.pdf

http://www.secnav.navy.mil/eie/Documents/DoNStrategyforRenewableEnergy.pdf

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In association with

In May 2010, the Air Force published its Air Force Energy Plan with the vision: To “make

energy a consideration in all we do.”

Renewable energy initiatives, as well as other energy

programs, were managed by the Air Force Facility Energy Center. In 2016, the Air Force

established the Air Force Office of Energy Assurance (OEA), which develops an integrated

facility energy portfolio and manages the progression of all energy initiatives for the service.

Also in 2016, the Air Force and the Army signed an interagency agreement to partner and

share resources in pursuing the fruition of their energy initiatives and renewable energy

goals.

In addition to the goal of producing 1 GW of renewable energy to support on-site

capacity by 2016, the Air Force is also pushing toward ensuring all new buildings are

designed to achieve zero-net-energy by 2030, beginning in 2020.

DEPARTMENT OF ENERGY, GENERAL SERVICES ADMINISTRATION AND OTHER FEDERAL

AGENCY IMPLEMENTATION OF GOALS

2.7.1. Department of Energy Initiatives

Even before the creation of the Office of Energy Efficiency & Renewable Energy (EERE) in

1993, DOE had been focused on the development and use of renewable energy and had

launched initiatives in support of renewable energy. After the passage of EPAct in 2005,

DOE created the Solar America Initiative (SAI) in 2006 as part of President Bush’s Advanced

Energy Initiative. The SAI’s goal was to make solar energy cost competitive by 2015.

EERE

and the State of Hawaii signed a Memorandum of Understanding in 2008, establishing the

Hawaii Clean Energy Initiative, a long-term partnership designed to transform Hawaii's

energy system to one that uses renewable energy and energy efficient technologies for a

significant portion (60-70%) of its energy needs.

In response to the ARRA, DOE created

the Energy Efficiency and Conservation Block Grant Program to provide $3.2 billion in block

grants to cities, communities, states, U.S. territories, and Indian tribes to develop, promote,

implement, and manage energy efficiency and conservation projects.

DOE’s Solar Energy Technology Office (SETO) launched the SunShot Initiative in 2011 with

the objective of making solar electricity costs competitive with other generation sources by

2020, without subsidies.

In September 2017, SETO announced the utility-scale solar goal

http://www.acc.af.mil/Portals/92/Docs/AFD-100930-035.pdf

https://www.army.mil/e2/c/downloads/429902.pdf

https://www.nrel.gov/docs/fy07osti/40936.pdf

http://www.hawaiicleanenergyinitiative.org/wp-content/uploads/2015/02/HCEI_FactSheet_Feb2017.pdf

https://www.energy.gov/eere/solar/articles/doe-pursues-sunshot-initiative-achieve-cost-competitive-solar-energy-2020

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had been met three years ahead of schedule.

SETO has stated that they will continue to

work to lower the cost of solar energy and has established a goal to halve the cost of solar

energy by 2030, committing up to $82 million in supportive funding to that end.

In addition to the SunShot Initiative, DOE also released the National Offshore Wind Strategy

in 2011, a strategic plan for accelerating the responsible deployment of offshore wind energy

in the United States. This publication serves as a blueprint to achieve 54 GW of deployed

offshore wind generating capacity by 2030.

The program expected to build from the more

than $90 million provided in ARRA and FY 2009 and FY 2010 appropriations provided to

DOE for wind initiatives. EERE launched the Clean Energy Manufacturing Initiative (CEMI) in

2013, a new DOE initiative focused on growing American manufacturing of clean energy

products and boosting U.S. competitiveness through major improvements in manufacturing

energy productivity.

Since initiating the program, DOE has issued $150 million in Advanced

Energy Manufacturing tax credits and supported state energy and economic development

offices to create state strategies for clean energy manufacturing and economic

development. Then in 2016, DOE’s Wind and Water Power Technologies Office released

Hydropower Vision, a roadmap by which U.S. hydropower could grow from 101 GW of

capacity in 2015 to nearly 150 GW by 2050.

DOE continues to provide significant support for renewable energy sources and technology.

In fact, DOE Secretary Perry just announced it is providing $105.5 million in funding for

several solar initiatives in partnership with the private sector, funding approximately 70

projects.

An additional $20 million is being provided to assist innovative solar technologies

intended to drive down the cost of solar production.

DOE also supports other agencies in increasing their acquisition of energy from renewable

sources. For example, the Federal Energy Management Program (FEMP) established the

Renewable Energy Procurement (REP) Program to provide training for Federal employees,

as well as acquisition assistance to Federal contracting offices in the procurement of

renewable energy.

https://www.energy.gov/articles/energy-department-announces-achievement-sunshot-goal-new-focus-solar-energy-office

Ibid.

https://www1.eere.energy.gov/wind/pdfs/national_offshore_wind_strategy.pdf

https://www.energy.gov/clean-energy-manufacturing-initiative

https://www.energy.gov/eere/water/articles/hydropower-vision-new-chapter-america-s-1st-renewable-electricity-source

https://www.energy.gov/articles/us-secretary-energy-rick-perry-announces-105-million-new-funding-advance-solar-technologies

https://www.energy.gov/articles/department-energy-announces-20-million-new-projects-lower-cost-power-electronics-solar

https://www.energy.gov/eere/femp/renewable-energy-procurement-Federal-agencies

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In association with

2.7.2. General Services Administration Initiatives

ARRA provided $5.55 billion to the General Services Administration (GSA) Federal Buildings

Fund of which no less than $4.5 billion was to be used to convert GSA facilities to High-

Performance Green buildings as defined in P.L. 110-140. An additional $4 million was

provided for the Office of Federal High-Performance Green Buildings, authorized in the

Energy Independence and Security Act of 2007. While this funding was largely targeted at

energy efficiency, this initiative also led to GSA’s commitment to increase its renewable

energy production and procurement by 30% by FY20.

For example, in 2014, GSA awarded a competitive power supply contract to a commercial

wind developer for the purchase of 140 megawatts (MW) of wind energy.

The energy will

come from the Walnut Ridge Wind Farm, which is currently in development in northwest

Illinois, and will add more than 500,000 megawatt-hours (MWhs) of electricity to the power

grid annually. The ten-year contract was awarded to MG2 Tribal Energy – a joint venture

between the Mesa Grande Band of Mission Indians, a Federally-recognized Native American

tribe, and Geronimo Energy, a commercial wind developer – and is the largest wind energy

purchase from a single source in Federal contracting history.

GSA has also initiated programs to implement other Administration objections, such as a

Net Zero program to achieve the goal of 100% use of renewable energy by 2030 established

in EISA.

2.7.3. Department of Veterans Affairs

In response to the renewable purchase goal of 7.5% of consumed energy by 2013 set for

Federal agencies in EPAct, the Department of Veterans Affairs (VA) actually doubled that

goal for itself to 15%. In order to reach this goal, the VA initiated a number of renewable

energy projects, including a $78 million solar project in Phoenix, AZ, a 455 Kw solar project

in Philadelphia, PA

, and both a wind turbine and a ground source heat pump generation

project in St. Cloud, MN.

In 2010 alone, the VA awarded $78 million in solar projects

nationwide.

In 2011, the VA awarded another $56 million in contracts for solar energy.

2016, the VA reported that 30% of their facilities’ electrical use came from renewable

sources.

See, https://www.gsa.gov/node/78816

See, https://www.gsa.gov/cdnstatic/RMI_white_paper_-_GSA_NZE-_2015-10-21.pdf

http://vabenefitblog.com/the-va-tackles-renewable-energy/

https://www.stcloud.va.gov/features/Wind_Turbine.asp

https://obamawhitehouse.archives.gov/blog/2010/10/22/leading-example-va-funds-solar-energy-projects-hospitals-clinics-cemeteries

https://www.pv-tech.org/news/us_department_of_veterans_affairs_grants_us56.7m_for_solar_installations_on

https://www.sustainability.gov/pdfs/va_scorecard_fy2016.pdf

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In association with

2.7.4. Department of Labor

The Department of Labor (DOL) received $750 million from ARRA for a program of

competitive grants for worker training and placement in high growth and emerging industry

sectors. Within the amount provided, $500 million was designated for projects that prepare

workers for careers in energy efficiency and renewable energy as described in the Green

Jobs Act of 2007. ARRA also appropriated $250 million for the DOL Job Corps Centers, of

which up to $37.5 million was made available for the operational needs of the Job Corps

program, including activities to provide additional training for careers in energy efficiency,

renewable energy, and environmental protection industries.

SUMMARY

Although there had been earlier attempts to promote the use of renewable energy, progress

was slow until the galvanizing impacts of Federal support through mandating the acquisition

and generation of renewable energy by Federal agencies, and Federal tax and credit

incentives to increase the affordability of renewable energy. These initiatives were matched,

and in some cases exceeded, by State programs which also mandated renewable energy

production and use by public utilities, and provided consumers with tax incentives for

renewable purchasing. As discussed in the sections that follow, this multipronged strategy

was effective and the combination of incentives meaningfully impacted the solar and wind

sectors in the United States.

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In association with

PROJECT LEVEL EFFECTS OF

FINANCIAL INCENTIVES

The financial incentives introduced by EPAct and subsequent legislation addressed several

financing challenges being faced at the time: first, renewable energy projects had a limited

track record of commercial deployment, particularly with the newer technologies being

introduced at the time; and second, for several years the financial markets were recovering

from the 2008-2009 economic downturn, limiting the availability of low cost, long term debt.

The financing tools introduced by the Federal government made renewable energy projects

financially feasible.

This section of the report describes these financial incentives and quantifies the impact of

incentives at the project level. Importantly, many of the financial incentives can be used in

combination, providing a cumulative benefit as reflected in the LCOE. This section is

organized as follows:

• Introduction and Description of Financial Incentives; and

• Project Level Financial Analysis.

For the analysis of financial incentives, solar and wind generation are examined as these

sources of renewable energy posted the largest gains over the period 2005 through 2015.

FINANCIAL INCENTIVES OFFERED TO RENEWABLES SINCE 2005

The financial incentives introduced or extended by EPAct and subsequent legislation can be

broadly categorized into two types: tax-based incentives and credit-based incentives. Tax-

based incentives encourage investment by providing a means of lowering an investor’s

taxable income while credit-based incentives increase the availability of debt capital and/or

lower borrowing cost. Each of these categories is described below.

3.1.1. Tax-Based Incentives

Tax-based incentives offer the benefit of being relatively easy to introduce and administer.

Once enacted, investors will realize the value of tax incentives by claiming credits or

deductions on their tax filings. To convert the benefit of tax incentives to facilitate project

development, project developers often collaborate with specialized financing entities who

have larger income, and thus a larger appetite for tax reductions. These specialized entities

are willing to trade cash “tax equity” for a stream of tax benefits. Tax equity represents a

source of capital for projects qualifying for tax incentives and reduces the amount of funding

required from conventional debt and equity sources. Third-party tax equity investors tend

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In association with

to be large, sophisticated institutional investors, and in 2016 funded approximately $13 billion

in tax equity investments, largely in the renewable energy sector.

The tax incentives utilized in the renewable sector are described below.

Investment Tax Credits (ITCs)

ITCs give a business a tax credit for a specified percentage of capital expenditures for

qualifying energy projects. ITCs are an investment-based subsidy as they provide upfront

financial support for the construction of a project which is expected to deliver a specified

good or service in the future (renewable energy in this case). The ITCs for renewable energy

property were established by EPAct 2005 and then modified by several subsequent laws:

The Energy Improvement and Extension Act of 2008, ARRA, and most recently the

Consolidated Appropriations Act of December 2015. The Tax Cut and Jobs Act of 2017 did

not change the status quo ITC offerings. Projects qualify for ITCs in the year they begin

construction, and receive ITCs when they are placed in service; projects can spread ITC

benefits over multiple years by “carrying forward” the unused amount. From 2005 to 2015,

ITCs were offered in an amount equal to 30% of qualifying investment costs. Since the value

of ITCs for individual projects often exceeds tax obligations, tax equity investors are

commonly used to fully realizing the benefit of ITCs.

Production Tax Credits (PTCs)

PTCs give a taxpaying entity a tax credit for power output, in terms of a fixed dollar amount

per unit of output. A PTC can thus be considered a form of results-based subsidy, in that it

is only paid out when the intended product (renewable energy in this case) is delivered.

PTCs have been offered for a specified number of years of production generally less than

the full operational life of power projects; since 2005, PTCs have been offered for eight years

of production for nuclear projects and 10 years for other technologies. PTCs for renewable

energy were first authorized by the Energy Policy Act of 1992, and then have been modified

or extended several times since then, including most recently EPAct 2005, ARRA in 2009, the

American Taxpayer Relief Act of 2012, the Tax Increase Prevention Act of 2014, and the

Consolidated Appropriations Act of 2016.

The Tax Cut and Jobs Act of 2017 did not change

the status quo PTC offerings. PTC payments were scaled up to adjust for inflation each year.

Tax Equity Update 2017. Bloomberg New Energy Finance. March 7, 2017.

Results-based subsidies, also commonly referred to as results-based financing (RBF) in international development, have been used to

support investment in renewables and other infrastructure. https://openknowledge.worldbank.org/handle/10986/17481

https://www.awea.org/production-tax-credit

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

As with the ITCs described previously, power projects often use tax equity financing to realize

the full benefit of PTCs.

Accelerated Depreciation

Accelerated depreciation—formally Modified Accelerated Cost Recovery System (MACRS)—

is a long-standing business tax incentive which is offered to renewable power projects and

a wide range of other business assets. Standard depreciation creates an annual expense over

many years for a capital asset by simply dividing the total capital expenditure by the

expected years of operating life (straight-line depreciation). The Tax Code of 1986

authorized MACRS as a way for businesses to realize higher depreciation expenses, and in

turn, lower tax liabilities, earlier in the life of an asset while still incurring the same total

depreciation.

MACRS effectively enhances the value of depreciation to taxpayers because early

depreciation is worth more than later depreciation, due to the time value of money.

Businesses which use MACRs will face a higher annual tax burden in later years than under

straight-line depreciation, because no depreciation is realized in later years and the tax

expense is correspondingly higher.

Different asset classes have different schedules for

accelerated depreciation under MACRS. Each asset class has a set “recovery period” which

defines the number of years over which depreciation is spread, and a “recovery method”

which determines how depreciation is spread over the recovery period. MACRS has generally

allowed a five-year recovery period for renewable energy property since 1986. MACRS

depreciation is generally not spread evenly over each year of the recovery period.

The Economic Stimulus Act of 2008 and ARRA of 2009 each offered “bonus depreciation”

which further accelerated the MACRS schedule by allowing an additional 50% of an asset’s

value to be depreciated in the first year of operating life while maintaining the original

recovery period. The Tax Relief, Unemployment Compensation Reauthorization, and Job

Creation Act of 2010 temporarily allowed 100% depreciation to be realized in the first year.

The Protecting Americans from Tax Hikes Act of 2015 extended bonus depreciation for

another five years with a phase-out schedule: 50% bonus from 2015 to 2017, 40% in 2018,

30% in 2019, and none thereafter.

US PREF, “MACRS Depreciation and Renewable Energy Finance."

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Exhibit 3-1 illustrates total depreciation under straight-line depreciation, MACRS, and

MACRS with 50% bonus depreciation. Six years are shown since projects are assumed to

become operational in mid-year by convention, which causes the five-year recovery period

to span all or part of six calendar years.

Exhibit 3-1: Cumulative Depreciation

As seen in Exhibit 3-1, MACRS front-loads depreciation such that a significantly higher

amount is realized in the early years of a project than under conventional straight-line

depreciation. MACRS with a bonus further increases first-year depreciation, although

cumulative depreciation in subsequent years is closer to regular MACRS.

Section 1603 Cash Grant

The Federal government briefly offered cash grants to developers of renewable energy

projects as an alternative to ITCs, in response to a decline in tax equity financing during the

2008-2009 economic downturn which stifled development of renewable power projects.

Before the downturn, about 20 tax equity investors were investing in new projects; in 2009,

This exhibit assumes that the project is placed into service mid-way through the first year. Thus, application of MACRS for five years runs

into the sixth year of project life.

Tax equity financing is explained in the previous discussion of investment tax credits.

20%

40%

60%

80%

100%

120%

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Cumulative Depreciation

MACRS MACRS + 50% Bonus Straight Line 20-Year

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

this number fell to only five. Section 1603 of ARRA offered cash payments to developers

equal to, and in lieu of, the existing ITC (30% of qualifying investment). This allowed

developers to receive a benefit equivalent to the ITC without relying on a tax equity investor.

The grant payments were offered to qualifying renewable energy projects which began

construction from 2009 to 2011.

The 1603 Cash Grants effectively extended ITCs to wind

projects, by providing grants equal to 30% of investment to wind projects in lieu of PTCs.

3.1.2. Credit-Based Incentives

As discussed previously, Section 1703 of EPAct established the DOE’s loan program targeted

at projects employing innovative technology. The program was subsequently modified by

the Energy Independence and Security Act (ESIA) of 2007 and ARRA of 2009.

Credit

support under the project can take two forms:

• Direct Loan: Under the program, DOE provides a direct loan through the Federal

Financing Bank (FFB), which serves as the lender.

FFB charges interest slightly above

U.S. Treasury rates. DOE then guarantees 100% of the FFB loan.

• Partial Loan Guarantees: DOE guarantees loans provided by commercial lenders.

DOE’s guarantee amount is capped at 80% of principal for a given loan, thus requiring

the lender to hold at least 20% of credit exposure.

Credit-based incentives provide budgetary advantages to the government as compared to

tax incentives and grants. Loans and loan guarantees are budgeted per the Federal Credit

Reform Act (FCRA) of 1990, which results in the budgetary impact of a given credit

transaction being less than the total value of the loan or loan guarantee provided. Broadly,

the subsidy costs are the difference between (1) the present value of expected cash flows

paid out by the government (loan disbursements or loan guarantee claims), and (2) the

present value of expected cash flows paid to the government (loan repayment or guarantee

fees). Thus, the subsidy cost is approximately the present value of the expected loss on a

“DOE Loan Programs: Current Estimated Net Costs Include $2.2 Billion in Credit Subsidy, Plus Administrative Expenses” by the U.S.

Government Accountability Office, April 2015.

Strictly speaking, this is a guarantee, but functions as a direct loan from DOE in all material respect given that DOE bears all of the credit

risk.

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

loan; for well underwritten loans, the expected loss is very low compared to the loan’s total

principal.

DOE’s loan program has supported many successful projects at a low cost to the Federal

government including 18 operational power plants (11 solar plants, four wind plants, and

three geothermal plants), and a new nuclear plant at the Vogtle site in Georgia. DOE has

also supported one storage project, one transmission project, one biofuel production

project, and three solar manufacturing projects.

The total loan values and subsidy costs for wind and solar are summarized in Exhibit 3-2.

The appropriated subsidy costs are notably small relative to the total loans.

Exhibit 3-2: DOE Credit Support

As of November 21, 2014

Source: "DOE Loan Programs: Current Estimated Net Costs…" by the GAO, April 2015

*Subsidy costs can change over time if the outlook on the performance of a loan changes.

EFFECT OF INCENTIVES ON INDIVIDUAL PROJECTS

The incentives discussed previously in Section 3.1 help to reduce the cost of power from

different generation technologies, thus enhancing their competitiveness against other

power sources. Tax credits, accelerated depreciation, and credit support enable significant

cost reductions when applied together, and enable power to be purchased by customers at

a lower price.

This section presents an analysis of the effects of certain incentives on the cost of power

from indicative generation projects. Costs are analyzed in terms of estimated LCOE of each

All raw data other than MW were sourced from “DOE Loan Programs: Current Estimated Net Costs…” by the GAO, 2015. Data on MW

were taken from https://energy.gov/lpo/portfolio/portfolio-projects.

All raw data other than MW were sourced from “DOE Loan Programs: Current Estimated Net Costs…” by the GAO, 2015. Data on MW

were taken from https://energy.gov/lpo/portfolio/portfolio-projects

Total Capacity

(MW)

Solar Generation

2,783 10,056 1,220 0.44

Wind Generation 1,025 1,656

47 0.05

Total Generation 3,808 11,712

1,267 0.33

Total Appropriated

Subsidy Costs per MW

(2015 $M)

Total Appropriated

Subsidy Costs

(2015 $M)*

Total Loans

(2015 $M)

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

technology, which takes all lifetime costs of a generation facility (including construction,

operations and maintenance, financing, and others), and spreads them across the

generation facility’s total lifetime power production to estimate a cost per unit of power,

typically in terms of cents per kilowatt-hour (¢/kWh).

77,78

LCOE is often used to make

generalized comparisons of the costs of different generation technologies, while bearing in

mind that individual projects’ costs can sometimes differ significantly from LCOE due to

differences in projects’ location, technical design, and other characteristics.

3.2.1. Solar LCOE

Solar projects were significant beneficiaries of ITCs, receiving tax credits equal to 30% of

qualifying capital investment costs. Since power projects typically sell power for many years,

the value of the ITC often exceeds a project’s tax obligation in any individual year. Thus, tax

equity investors are often required to realize the full benefit of ITCs, as discussed in Section

3.1.1. Solar projects were also the primary beneficiary of DOE’s power generation support

through Section 1705, with solar comprising 75% of total loan value and 70% of installed

generation capacity under the program.

LCOE for solar was analyzed using the Stanford Graduate School of Business Sustainability

Initiative’s LCOE Calculator.

The solar project was assumed to be utility scale and located

in an area with mid-range solar resources. These characteristics along with other project

assumptions related to useful life, incentives and financing were entered into the calculator

to derive a LCOE for a project under varying levels of incentives.

The results of this analysis

are presented in Exhibit 3-3 which shows the LCOE incremental benefit to an indicative solar

project of adding multiple incentives on top of each other.

DOE Office of Indian Energy, “Levelized Cost of Energy (LCOE), accessed May 11, 2018

(https://www.energy.gov/sites/prod/files/2015/08/f25/LCOE.pdf)

The Stanford Graduate School of Business Sustainability Initiative’s LCOE Calculator was used for the calculations

(http://stanford.edu/dept/gsb_circle/cgi-bin/sustainableEnergy/LCOE.py)

The full assumptions for solar and wind LCOE calculations can be found in Sections 3.2.1 and 3.2.2.

Government Accountability Office, “DOE Loan Programs: Current Estimated Net Costs...,” April 2015. Note that the Section 1705 total

loan value also includes manufacturing, transmission, and storage, as well as renewable generation.

Stanford Graduate School of Business Sustainability Initiative, “LCOE Calculator,” (http://stanford.edu/dept/gsb_circle/cgi-

bin/sustainableEnergy/LCOE.py), accessed May 16, 2018

See. Appendix A-1 for detailed assumptions.

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In association with

Exhibit 3-3: LCOE of Solar Project

Adding an investment tax credit reduces the cost of solar power by 32%. Bonus depreciation

makes a much smaller reduction, and DOE credit support brings the cost down by another

1.0¢, or 12% of the baseline cost. DOE loans offer interest at the Treasury rate plus a premium

of 0.25%; this results in a cost of debt of 3.3% for a 20-year DOE loan.

All together, these

incentives reduce the cost of power by 3.9¢, or 48% of the baseline cost.

3.2.2. Wind LCOE

Wind power projects primarily benefitted from PTCs. As described in Section 3.1.1, PTCs have

been offered since well before EPAct 2005, and were typically available for 10 years of a

Stanford Graduate School of Business Sustainability Initiative, “LCOE Calculator,” (http://stanford.edu/dept/gsb_circle/cgi-

bin/sustainableEnergy/LCOE.py), accessed May 16, 2018.

Based on Treasury rates found at https://www.bloomberg.com/markets/rates-bonds/government-bonds/us, accessed May 9, 2018.

Solar LCOE

After

Incentives

Cost of Power (¢/kWh)

Solar

Baseline

LCOE

8.2¢

2.6¢

0.4¢

1.0¢

ITC

MACRS

Bonus

Depreciation

DOE Credit

Support

4.2¢

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

project’s operating life, thus reducing tax expense and increasing revenue for a significant

portion of a project’s operating life. ITCs were largely unavailable to wind projects.

As with solar, the LCOE for wind was analyzed using the Stanford LCOE Calculator.

The

wind project was assumed to be utility scale and located in an area with average mid-range

wind resources. These characteristics along with other project assumptions related to useful

life, incentives and financing were entered into the calculator to derive a LCOE for a project

under varying levels of incentives.

Exhibit 3-4 illustrates the benefit of various incentives

on an indicative wind power project.

The 1603 Cash Grant Program awarded grants to wind projects in lieu of PTCs. These grants to wind projects were structured in the

same way as the grants in lieu of ITCs offered to solar projects. Thus, wind projects could receive a benefit effectively equivalent to ITCs

during the 1603 Cash Grant Program’s life. Wind projects were the largest beneficiary of 1603 Cash Grants in dollar terms, receiving a total

of $13.90 billion. See U.S. Treasury, “Final Overview of the Section 1603 Program,” March 1, 2018.

Stanford Graduate School of Business Sustainability Initiative, “LCOE Calculator,” (http://stanford.edu/dept/gsb_circle/cgi-

bin/sustainableEnergy/LCOE.py), accessed May 16, 2018

See. Appendix A-2 for detailed assumptions.

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Exhibit 3-4: LCOE of Wind Project

88,89

As with solar power, adding incentives to a wind power project result in significant cost

reductions. A production tax credit reduces the cost of wind power by 13%. Bonus

depreciation makes a much smaller reduction, and DOE credit support brings the cost down

by another 1.1¢, or 16% of the baseline cost. DOE loans offer interest at the Treasury rate

plus a premium of 0.25%; this results in a cost of debt of 3.3% for a 20-year DOE loan.

All

together, these incentives reduce the cost of power by 2.4¢, or 35% of the baseline cost.

SUMMARY

Tax credits and credit support for renewable power generation projects can enable

significant reductions in the cost of electricity. Applying several incentives together reduces

costs more, indicating that a comprehensive incentive policy should consider how multiple

offerings work together. The combination of tax credits, accelerated depreciation, and credit

support is estimated to reduce the cost of power by 48% for solar power, and 35% for wind.

The Stanford Graduate School of Business LCOE Calculator was used for the calculations, with the indicative project being located in

Wyoming. The project thus has costs, capacity factors, and state taxation reflecting Wyoming. (

http://stanford.edu/dept/gsb_circle/cgi-

bin/sustainableEnergy/LCOE.py).

Wind projects could receive 1603 Cash Grants which were valued at 30% of qualifying capital expenditure and were effectively equivalent

to receiving an ITC.

Based on Treasury rates found at https://www.bloomberg.com/markets/rates-bonds/government-bonds/us, accessed May 9, 2018.

Wind LCOE

After

Incentives

Cost of Power (¢/kWh)

Wind

Baseline

LCOE

6.9¢

0.9¢

0.4¢

1.1¢

PTC

MACRS

Bonus

Depreciation

DOE

Credit

Support

4.5¢

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

COSTS AND ECONOMIC

BENEFITS OF SUPPORT PROGRAMS FOR

RENEWABLES

Chapter 2 of this report described the multi-pronged strategy deployed at the Federal and

State level to increase the demand and in turn commercial deployment of renewable energy

in the U.S. power sector. Chapter 3 provided illustrative examples of how these incentives

reduced the cost of power at the power level. By all accounts, this strategy has been

successful. From 2005 through 2015, renewable energy penetration in the power mix has

increased from 9% to 16% with the most significant gains coming from solar and wind

generation sources. In addition to energy generation, the government financial assistance

have led to industry evolution, driving down costs, demonstrating technologies, creating

jobs, and lowering prices.

This chapter of the report attempts to quantify the level of investment made by the Federal

government in the renewable sector over the 2005 through 2015 period and the associated

impacts on market penetration and industry evolution. The analysis focuses on the solar and

wind sectors as these technologies posted the strongest gains over the period examined.

This chapter analyzes the total investment by the Federal government in solar and wind and

then examines the industry gains posted in terms capacity installed, generation, and job

growth.

COSTS OF INCENTIVE PROGRAMS

Growth in the solar and wind power industries was supported by a combination of Federal

spending on supply-side incentives (tax incentives, credit support, and R&D), and demand

mandates by the Federal and state governments. To quantify the cost of incentive programs,

this report examines the revenue loss associated with tax incentives, the appropriated credit

subsidy associated with credit incentives, and the direct spending associated with research

and development initiatives.

Demand mandates were also an important component of the incentive strategy. As shown

in Exhibit 4-1, the share of energy consumption comprised of renewables more than doubled

from 2008 to 2016, reaching 12.4%.

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Exhibit 4-1: Renewables as a Share of Federal Energy Consumption

State RPS mandates have and will contribute more significantly to demand growth and will

require an average annual capacity addition of 4 GW to reach 2030 targets.

Despite the importance of demand mandates to driving industry growth, measuring the cost

to the government represents a challenge. The cost of demand mandates is not total

spending on renewable power, but rather the additional cost of renewable power over the

term of a power purchase agreement. This type of avoided cost analysis is subject to

significant uncertainty, is project-specific, and cannot be meaningfully aggregated. Also,

some organizations, like the U.S. Army, seek to procure renewable power at or below

prevailing grid energy prices. Other agencies purchased Renewable Energy Credits (RECs)

Barbose, “U.S. Renewables Portfolio Standards: 2017 Annual Status Report,” July 2017.

5.37%

5.76%

7.18%

9.17%

8.76%

8.30%

12.43%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

2010 2011 2012 2013 2014 2015 2016

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

as an alternative to entering into long-term power purchase agreements. Given these

challenges, this section does not attempt to quantify the cost of demand mandates.

As illustrated in Exhibit 4-2, based on a review of incentives for solar and wind from 2005 to

2015, it is estimated that the Federal government spent $51.2 billion, with tax incentives

accounting for 90% of the total.

Exhibit 4-2: Total Incentives for Wind and Solar

Each component of these incentives is examined below.

Based on Scully Capital analysis discussed throughout this section.

Chart shows $51.1 billion instead of $51.2 B of total incentives; slight difference due to rounding.

Tax Incentives $45.8 B

(90%)

Credit Incentives $1.3 B (2%)

R&D Grants $4 B

Total Incentives:

$51.2 Billion

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

4.1.1. Tax-Based Incentives

The Federal government incurred significant tax expenditure to subsidize solar and wind—

tax expenditure is defined as the amount of tax revenue the Federal government loses

through special tax credits and other incentives which reduce tax obligations.

The Federal

government spent a total of $45.8 billion on tax incentives for solar and wind from 2005 to

2015. Of this, production tax credits comprised 46.4%, or $21.3 billion. Spending on 1603

Cash Grants comprised $20.4 billion, or 44.5% of the total. This was followed by investment

tax credits of $2.4 billion, or $5.13% of the total; it is worth noting that 1603 Cash Grants

were effectively a substitute for ITCs, so investment-based subsidies were in fact very large

if ITCs and 1603 Cash Grants are considered together. Lastly, MACRS incentives were worth

$1.8 billion, or 3.97% of the total. This is summarized in Exhibit 4-3.

Exhibit 4-3: Summary of Tax-Based Incentives in 2015 Billions of U.S. Dollars

The details on tax incentives for solar and wind are presented below.

Tax Policy Center, “Tax Policy Center Briefing Book,” accessed May 20 (https://www.taxpolicycenter.org/briefing-

book/what-are-tax-expenditures-and-how-are-they-structured).

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(2015 $B)

PTC

1603 Cash Grant

MACRS

ITC

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Tax Incentives for Solar Generation

As shown in Exhibit 4-4, tax expenditure for solar became significant from 2010 onwards,

totaling $11.6 billion. Before then, tax expenditure for solar never exceeded the Joint

Committee on Taxation (JCT) reporting threshold of $5 million in a given year, and thus was

not reported.

Exhibit 4-4: Tax Incentive Spending for Solar

The 1603 Cash Grant comprises the vast majority of tax incentives for solar ($8.9 billion); as

the 1603 Cash Grants were given to solar projects in lieu of ITCs, they are reported here

along with the other tax incentives. ITC expenditure totaled $11.4 billion over the period.

However, as the name would imply, 1603 Cash Grants were cash disbursements and thus

not measured in terms of revenue loss.

MACRS comprised a small share of tax incentive

spending for solar, totaling just $300 million.

PTCs for solar power never exceeded the JTC

reporting threshold.

PTCs were available for solar projects not claiming the ITC, but never exceeded the JCT reporting threshold.

1603 Cash Grants were not recorded in the Joint Committee on Taxation’s “Estimates of Federal Tax Expenditure…”

Detailed tables with data on solar tax incentives for each year and the relevant sources can be found in Appendix B.

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(2015 $B)

ITC

1603 Cash Grant

MACRS

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Tax Incentives for Wind Generation

Total tax expenditure for wind, as shown in Exhibit 4-5, was relatively large at $34.2 billion.

This was around three times more than for solar, reflecting the fact that wind power had

significantly higher capacity growth (in terms of MW coming on the grid) than did solar from

2005 to 2015 (see Chapter 4.2). It is also important to note that this report takes an approach

to estimating PTC expenditure which results in higher expenditure than government

reporting; this report counts all PTCs for a given project as being expensed in the first year

that the project receives PTCs, rather than spreading them over a project’s 10-year life. This

reflects the fact that investment decisions are made around the expectation of PTCs over

many years, as projects are built and financed around confidence in PTCs being realized in

the future. Details on the methodology for estimating wind tax expenditure can be found in

the Appendix.

Exhibit 4-5: Tax Incentive Spending for Wind

PTCs comprised the largest part of wind tax expenditure at $21.3 billion. ITCs were generally

not offered for wind power projects; however, wind projects could claim 1603 Cash Grants

in lieu of tax credits. Wind projects also received significant support from 1603 Cash Grants,

totaling $11.4 billion. 1603 Cash Grants were offered for 30% of qualifying investment for

wind, thus being equivalent to a 30% ITC. As with the previous discussion of solar, 1603 Cash

1.0

2.0

3.0

4.0

5.0

6.0

7.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(2015 $B)

PTC

1603 Cash Grant

MACRS

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Grants were not a tax expenditure, but are included here since they were offered in lieu of

tax credits. MACRs comprised a small share of tax incentives for wind, totaling $1.5 billion.

4.1.2. Credit-Based Incentives

The Federal government offered significant credit support in the form of loans and loan

guarantees for wind and solar through DOE’s lending authority. In total, DOE provided $11.7

billion in credit assistance to 3,808 MW of solar and wind projects. Although the loans

supported by DOE totaled $11.7 billion, the appropriated subsidy costs were only $1.3 billion,

reflecting the use of credit subsidy in budgeting. Thus, the Federal government carried only

11% of the total cost of loans or $332,711 per MW.

Exhibit 4-6: LPO Credit Incentive Spending for Wind and Solar

100

Solar generation received the vast majority of DOE support, with $10.1 billion of loans

supporting 2,783 MW; this incurred subsidy costs of just $1.2 billion. Total Federal costs for

Detailed tables with data on wind tax incentives for each year and the relevant sources can be found in the Appendix.

Government Accountability Office, “DOE Loan Programs: Current Estimated Net Costs…,” April 2015. The cost per MW

was calculated for this report by dividing the total appropriated subsidy costs by the MW supported.

100

Government Accountability Office, “DOE Loan Programs: Current Estimated Net Costs…,” April 2015.

2,000

4,000

6,000

8,000

10,000

12,000

Total Loans

(2015 $M)

Total Appropriated Subsidy Costs (2015

$M)*

Solar Generation

Wind Generation

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

solar were just 12% of the total loans. A total of 1,025 MW of wind projects were built, with

$1.7 billion of loans and a subsidy cost of just $47 million. Total Federal subsidy costs for

wind were just 2.8% of loans. The budgeted cost for solar was nearly 24 times larger than

the budgeted cost for wind.

101

Research and Development Expenditures

Federal R&D spending on solar power totaled $3.2 billion from 2005 to 2015 and totaled

$880 million for wind power over same period. Three quarters of solar spending came from

DOE; the remainder came from the U.S. Department of Agriculture (USDA) and the National

Aeronautics and Space Administration (NASA). R&D spending is summarized in Exhibit 4-

102

101

Government Accountability Office, “DOE Loan Programs: Current Estimated Net Costs…,” April 2015. The source

document did not break out spending by year or by individual project, to protect confidentiality of individual projects’

credit subsidies and other data.

102

Managed Information Services, Inc., “Two Thirds of a Century and $1 Trillion+ U.S Energy Incentives,” published by the

Nuclear Energy Institute, May 2017.

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Exhibit 4-7: R&D Spending for Solar and Wind

103

As seen in Exhibit 4-7, solar R&D spending was significantly higher from 2010 onwards. This

reflects, in part, DOE’s SunShot Initiative, which aimed to reduce the cost of solar power.

SunShot has supported a range of initiatives in design of solar panels, integrating solar

power with the grid, and encouraging commercialization of new technologies and business

models.

104,105

BENEFITS OF INCENTIVE PROGRAMS

While the Federal government’s $51.2 billion investment in solar and wind represents a large

commitment, the impact on the industry and U.S. generation mix has been significant.

Strong government support resulted in meaningful growth in generation capacity and

power production for solar and wind, and stimulated related employment.

The incentive programs discussed in Section 3.1 stimulated growth in the solar and wind

power industries. Deployment of solar and generation capacity, and the resulting electricity,

103

Managed Information Services, Inc., “Two Thirds of a Century and $1 Trillion+ U.S Energy Incentives,” published by the

Nuclear Energy Institute, May 2017.

104

U.S. Department of Energy, “The SunShot Initiative’s 2030 Goal…,” December 2016.

105

U.S. Department of Energy, “Technology to Market,” February 2016.

0.00

0.10

0.20

0.30

0.40

0.50

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(2015 $B)

Solar R&D

Wind R&D

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

have grown sharply since 2005. Power production has become more efficient, and costs

have fallen, for both technologies. Industry growth has also brought benefits to the

American economy in terms of employment. This section first discusses developments in the

solar power industry, and then discusses wind.

4.2.1. Solar Energy Market Penetration and Industry Development

The solar power industry has realized dramatic growth from 2005 to 2015, with installed

capacity of 23,440 MW in 2015 being over 26 times larger than installed capacity in 2005.

From 2010 to 2016, solar was the fastest growing utility-scale generation source in the U.S.

106

This growth is summarized in Exhibit 4-8.

Exhibit 4-8: Growth in Solar Capacity

107

106

U.S. Energy Information Administration, “Utility-Scale Solar Has Grown Rapidly Over the Past Five Years,” accessed

May 22, 2018 (https://www.eia.gov/todayinenergy/detail.php?id=31072

)

107

International Renewable Energy Agency, “Data and Statistics,” accessed April 17, 2018

(http://resourceirena.irena.org/gateway/dashboard/

)

5,000

10,000

15,000

20,000

25,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Solar Installed Capacity (MW)

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Since 2005, solar has risen from a relatively minor source of power to comprising 30% of

additional capacity brought online in the U.S. in 2017.

108

Growth in solar power was driven

by growth in installed capacity and was also influenced by an overall improvement in

capacity factors for solar generation (the ratio of actual output to maximum potential output

in a given time period).

109

This led to significant increases in solar power generation as

reflected in Exhibit 4-9.

Exhibit 4-9: Growth in Solar Generation

Solar capacity factors improved due to many influences, including selection of project sites

with better solar resource quality, use of solar panel designs which track the sun’s movement,

and improved inverters.

110,111

The dramatic growth in solar capacity and generation has been

108

Solar Energy Industries Association, “Solar Market Insight Report 2017 Year in Review,” accessed May 22, 2018

(https://www.seia.org/research-resources/solar-market-insight-report-2017-year-review

)

109

Bolinger et al, “Utility Scale Solar 2016,” published by Lawrence Berkeley national Laboratory, September 2017.

110

Bolinger et al, “Utility Scale Solar 2016,” published by Lawrence Berkeley national Laboratory, September 2017.

111

Inverters convert electricity generated by sunlight striking solar modules (direct current) into electricity which is more easily used in the

power grid (alternating current). See

https://www.sunrun.com/go-solar-center/solar-articles/what-is-a-solar-inverter-and-how-does-it-

work.

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Solar Generation (GWh)

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

supported by declining costs for solar power. From 2006 to 2015, average solar module

prices declined by 77% in real terms, falling from $3,014 per MW to $705 per MW.

112

This is

shown in Exhibit 4-10.

Exhibit 4-10: Real Prices for Solar Modules

113

Module prices have fallen largely due to efficiency gains in manufacturing and global

competition, especially due to pressure from Chinese manufactures. The number of module

manufacturing facilities in the U.S. fell from 51 in 2011 to 38 in 2013.

114

China has been the

world’s largest producer of modules since 2007, and also leads across other stages of the

PV supply chain (silicon, silicon wafers, solar cells). China’s share of world module output

112

U.S. Energy Information Administration, Form EIA-63B, “Annual Photovoltaic Cell/Module Shipments Report,” accessed May 4, 2018

(https://www.eia.gov/renewable/annual/solar_photo/pdf/table4.pdf). Data were not available for 2005.

113

U.S. Energy Information Administration, Form EIA-63B, “Annual Photovoltaic Cell/Module Shipments Report,” accessed May 4, 2018

(https://www.eia.gov/renewable/annual/solar_photo/pdf/table4.pdf). Data were not available for 2005.

114

“U.S. Solar Photovoltaic Manufacturing…” by Platzer, CRS, January 2015.

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Average Module Prices (2015$ per MW)

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

grew from 61% in 2011 to 74% in 2016.

115

Solar manufacturing in China has also experienced

consolidation; from 2011 to 2015 the number of PV module and cell manufacturers in China

dropped by over 300 to under 100.

116

Foreign solar manufacturers may move some

production to the U.S. in response to recently implemented tariffs; Jinko Solar of China plans

to investment $50 million in a factory in Florida.

117

While Chinese manufacturers have played a major part in the global market for solar

equipment, American firms have also been successful. In particular, First Solar, Inc. of Arizona

stands out as a global cost leader, with over 17 GW of capacity installed worldwide, and sales

in Asia, Europe, Latin America, the Middle East, and the United States. The company was the

world’s seventh-largest module supplier in 2016.

118

First Solar’s cost competitiveness has

been enabled by strong investment in R&D, investing more in R&D than all other

competitors; its cumulative R&D spending is expected to surpass $1 billion in 2016.

119,120

The

company gains significant competitive advantages through innovative production

processes, product designs which reduce the amount of silicon required for modules, and

other means. First Solar’s financial statements state that the company has benefitted from

tax credits and other subsidies for renewable power in the U.S. and foreign markets.

121

As would be expected from strong growth in solar installed capacity and generation,

employment in solar energy has grown quickly in recent years and is expected to continue

growing quickly. Solar jobs are estimated to have grown at 11.82% CAGR from 2003 to

2010.

122

In 2016, solar power was estimated to have employed 374,000 people. Solar jobs

were estimated to have grown by 25% in 2016.

123

Notably, the Bureau of Labor Statistics estimates that solar PV installers will be the fastest

growing job from 2016 to 2026, with an expected annual growth rate of 7.41% which far

outpaces the forecast 0.71% annual growth for total employment in the U.S.

124

Outside of

115

“PVPS Annual Report” by International Energy Agency, 2017.

116

“U.S. Solar Photovoltaic Manufacturing…” by Platzer, CRS, January 2015.

117

St. John, “Jinko Solar Confirms $50M Investment in US Factory,” Greentech Media, March 30, 2018; accessed May 22, 2018

(https://www.greentechmedia.com/articles/read/jinkosolar-confirms-410m-investment-in-u-s-factory-to-make-tariff-free#gs.EBedfFA).

“

118

“Top-10 Solar Module Suppliers in 2016,” PVTech, accessed May 4, 2018 (https://www.pv-tech.org/editors-blog/top-10-solar-module-

suppliers-in-2016).

119

First Solar 10-K Filing for 2016.

120

“First Solar to Surpass US$1 Billion in Cumulative R&D Spending in 2016,” PVTech, accessed May 4, 2018 (https://www.pv-

tech.org/editors-blog/top-10-solar-module-suppliers-in-2016).

121

First Solar 10-K filing, 2016.

122

Muro et al, "Sizing the Clean Economy," Brookings Institution, 2011.

123

Department of Energy, "U.S. Energy and Employment Report," January 2017.

124

Bureau of Labor Statistics, "News Release: Employment Projections 2016-2026," October 24, 2017.

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

manufacturing, the solar power industry creates jobs in many other areas, such as system

design (including IT specialists and power system engineers), project development (including

utility procurement specialists and solar site assessors), and installation and operations

(including project managers and installation instructors).

125

The solar industry is a significant contributor to the wider economy. The Solar Foundation

estimates that the solar industry added $84 billion to U.S. GDP in 2016. The industry also

generated approximately $50 billion in labor income, $11.6 billion in Federal taxes, and $6.5

billion in state and local taxes. One dollar of spending on solar power was estimated to

generate an additional $1.46 in spending elsewhere in the economy.

126

4.2.2. Industry and Job Development for Wind

The wind power industry has realized strong growth from 2005 to 2015, with installed

capacity of 74,470 MW in 2015 being over eight times larger than installed capacity in 2005.

Wind comprised 31% of capacity additions in the U.S. from 2006 to 2016.

127

This growth is

summarized in Exhibit 4-11.

125

IREC, “Solar Career Map,” referenced May 8, 2018 (http://irecsolarcareermap.org/).

126

Solar Foundation, “U.S. Solar Industry Added $84 Billion to U.S. G.D.P. in 2016,” accessed May 22, 2018

(http://www.thesolarfoundation.org/wp-content/uploads/2017/04/2016-Census-Economic-Impacts_Final.pdf).

127

Wiser et al, “2016 Wind Technologies market Report: Summary,” U.S. Department of Energy, 2017.

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Exhibit 4-11: Growth in Wind Capacity

128

In 2016, the U.S. realized the second largest wind capacity additions worldwide and had the

second largest installed wind capacity.

129

Wind generation has realized similarly strong

growth, as shown in Exhibit 4-12. Growth in generation was driven by growth in installed

capacity and was also influenced by an overall improvement in capacity factors for wind

generation (the ratio of actual output to maximum potential output in a given time

period).

130

128

International Renewable Energy Agency, “Data and Statistics,” accessed April 17, 2018

(http://resourceirena.irena.org/gateway/dashboard/).

129

Wiser et al, “2016 Wind Technologies Market Report: Summary,” U.S. Department of Energy, 2017.

130

U.S. Department of Energy, “2016 Wind Technologies Market Report,” 2018.

15,000

30,000

45,000

60,000

75,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Wind Installed Capacity (MW)

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Exhibit 4-12: Growth in Wind Generation

131

The U.S. Energy Information Administration expects that wind power’s strong growth will

result in wind surpassing hydropower as the largest source of renewable generation in

2018.

132

Wind generation growth has also been influenced by improvements in capacity

factors. Newer wind facilities have generally had higher capacity factors than older ones, due

to improvements in turbine designs and higher quality wind resource sites.

133

The dramatic growth in wind capacity and generation has been supported by declining costs

for wind power. From the first half of 2008 to the second half of 2015, average turbine prices

declined by 25% according to a global price index from Bloomberg New Energy Finance.

134

This is shown in Exhibit 4-13.

131

International Renewable Energy Agency, “Data and Statistics,” accessed April 17, 2018

(http://resourceirena.irena.org/gateway/dashboard/).

132

U.S. Energy Information Administration, “Wind Expected to Surpass Hydro as Largest Renewable Electricity Generation Source,” January

24, 2018; accessed May 22, 2018 (https://www.eia.gov/todayinenergy/detail.php?id=34652#).

133

U.S. Department of Energy, “2016 Wind Technologies Market Report,” 2018.

134

Data were not available before 2008.

25,000

50,000

75,000

100,000

125,000

150,000

175,000

200,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Wind Generation (GWh)

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

Exhibit 4-13: Turbine Price Index

135

Turbine prices have generally fallen worldwide in recent years due to cost competition

among turbine suppliers and cost-cutting initiatives among component suppliers, and by

declining prices of commodity inputs to manufacturing (such as energy and metals).

Purchasers have also received more favorable sales terms in recent years, including reduced

time to delivery and stronger performance guarantees.

136,137

Wind power prices are expected

to be generally competitive with natural gas through 2050.

138

As would be expected from strong growth in wind installed capacity and generation,

employment in wind energy has grown quickly in recent years and is expected to continue

growing quickly. Wind jobs are estimated to have grown at 14.9% CAGR from 2003 to

2010.

139

Wind power is estimated to have employed 101,738 workers in 2016. More recently,

wind jobs grew by 32.0% in 2016.

140

Notably, the Bureau of Labor Statistics estimates that

135

Data from: Bloomberg New Energy Finance "H2 2016 Wind Turbine Price Index," January 4, 2017. The index does not show actual prices,

but rather uses an index to compare prices worldwide at different times.

136

U.S. Department of Energy, “2016 Wind Technologies Market Report,” 2018.

137

Moné et al, “2015 Cost of Wind Energy Review,” published by NREL, 2017.

138

Wiser et al, “2016 Wind Technologies Market Report: Summary,” U.S. Department of Energy, 2017.

139

Muro et al, "Sizing the Clean Economy," Brookings Institution, 2011.

140

Department of Energy, "U.S. Energy and Employment Report," January 2017.

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2008 H1 2009 H1 2010 H1 2011 H1 2012 H1 2013 H1 2014 H1 2015 H1

Turbine Price ($/MW) Index

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

wind turbine technicians will be the second-fastest growing job from 2016 to 2026, with an

expected annual growth rate of 6.99% which far outpaces the forecast 0.71% annual growth

for total employment in the U.S.; only solar PV installers will grow faster.

141

The wind industry

employs workers in all 50 states.

142

Although the U.S. is a net importer of wind power equipment, there is significant

manufacturing of wind turbine parts in the U.S. There are over 500 wind-related

manufacturing facilities in the U.S. across 43 states.

143

In 2016, domestic content in wind

towers ranged from 65%-80%, and from 50%-70% for blades and hubs. However, nacelles

often have domestic content of under 20%.

144

Globally, General Electric (GE) is the second-

largest manufacturer of wind turbines, following Vestas of Denmark.

145

GE was also the

second-largest provider of wind turbines for the U.S. market in 2016 with a 42% share, just

behind Vestas at 43%. Domestic jobs are also found at wind power manufacturing facilities

owned by foreign firms. Vestas, ABB, Siemens, Vest-Fiber, and other foreign firms

manufacture components in the U.S. Besides manufacturing, the wind power industry

creates jobs in project development (including attorneys and land acquisition specialists),

construction (including engineers and construction tradesmen), operations (including asset

managers and meteorological technicians), and education, training, and research (including

scientists and technical instructors).

146

Wind power also contributes to the wider economy. Wind power projects pay more than

$245 million annually in lease payments to access land for generation sites. The industry is

expected to provide $8 billion in tax payments and to have a total economic impact of $85

billion from 2018 to 2020. Wind power is also expected to create 102,000 induced jobs in

other sectors in the same period.

147

SUMMARY

The Federal government spent significant amounts on solar and wind power from 2005 to

2015 through several channels. In total, this spending amounted to $51.2 billion, of which

141

Bureau of Labor Statistics, "News Release: Employment Projections 2016-2026," October 24, 2017.

142

American Wind Energy Association, “Wind Brings Job and Economic Development to All 50 States,” March 9, 2017.

143

American Wind Energy Association, “Wind Brings Job and Economic Development to All 50 States,” March 9, 2017.

144

According to DOE’s “2016 Wind Technologies Market Report,” nacelle domestic content has been rated as above 90%

by some approaches, but this does not capture most parts internal to nacelles. When more internal parts are considering,

the domestic content drops considerably.

145

Department of Energy, “2016 Wind Technologies Market Report,” 2018.

146

U.S. Department of Energy, “Wind Career Map,” referenced May 8, 2018 (https://www.energy.gov/eere/wind/wind-career-map).

147

American Wind Energy Association, “Wind Brings Job and Economic Development to All 50 States,” March 9, 2017.

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

$16 billion (31%) went to solar, and $35 billion (69%) went to wind. Spending through tax

incentives, credit incentives, and R&D is summarized in Exhibit 4-14.

Exhibit 4-14: Total Incentive Spending for Solar and Wind

Tax incentives comprised the vast majority of total incentive spending at $45.84 billion, or

90% of the total. Credit incentives and R&D provided the remainder. Credit incentives

provided significant opportunities for leveraging financial support, as appropriated subsidy

costs for Federal loans and loan guarantees were significantly lower than the total loans

received by supported projects.

Significant spending on solar and wind resulted in significant growth in both industries. From

2005 to 2015, solar capacity grew by 77,794 MW, with $206,000 of Federal support per MW.

Wind capacity grew by 446,548 MW, with $79,000 of Federal support per MW. This also

facilitated growth of employment in solar and wind jobs, such that those industries are

expected to provide the two fastest growing occupations through 2026. Both industries

make strong contributions to the wider economy, including stimulating growth in other

sectors and making significant tax payments.

Incentive

Tax Incentives 11.65$ 34.19

45.84

Credit Incentives

1.22 0.05

1.27

R&D 3.17 0.88 4.05

Total 16.04$ 35.11$ 51.15$

Solar Expenditures

(2015 $B)

Wind Expenditures

(2015 $B)

Total Expenditures

(2015 $B)

EXAMINATION OF FEDERAL FINANCIAL ASSISTANCE IN THE RENEWABLE ENERGY MARKET

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In association with

APPLICATION TO SMRS