Arlington, VA; December 7, 2011 – In a letter to Chairmen and Ranking Members of the Senate Finance and House Ways and Means committees, NRECA is urging Congress to include incentives for renewable energy development by cooperatives, if there is a tax bill addressing energy extenders.
The 1603 Treasury Grant Program, which is set to expire at the end of 2011, and the Clean Renewable Energy Bond (CREB) program, which exhausted its funding in 2010, have helped electric cooperatives develop new renewable projects at an affordable cost. The 1603 Treasury Grant Program has been critical to the success of renewable projects in a challenging economic environment.
Ending these programs will almost certainly prevent cooperatives from developing any significant new renewable projects and, in effect, ends a successful federal policy to promote the development of domestic resources.
In 2007, electric cooperative renewable energy capacity -- both owned and purchased -- non-hydro renewable energy capacity grew 61 percent; in 2008, renewable capacity grew 65 percent. The federal incentives fueled this growth.
The Clean Renewable Energy Bond (CREB) program provides an incentive similar to production tax credits that have long been available to the for-profit sector: known as a “tax credit bond,” a CREB offers cooperatives the equivalent of a low-interest loan for financing qualified renewable energy projects for a limited term. The program unleashed pent-up demand among cooperatives eager to develop renewable projects.
Electric cooperatives have submitted more than $1.4 billion in applications since CREBs were first authorized, oversubscribing their share of CREBs authorizations. Co-ops have initiated wind, solar, biomass and hydropower projects in 18 states. Twenty-eight projects representing more than 209 MW of capacity are already in service, and co-ops are poised to finance another 17 projects representing at least 235 MW of new capacity with recent awards under the program.
Electric cooperatives can play an important role in developing the nation’s renewable energy resources. Some cooperative utilities serve ideal locations for developing renewable resources. However, new renewable generation remains more expensive to install than conventional gas or coal generation.
Investor-owned utilities and private developers can use PTCs to help reduce the price of renewable generation from wind, closed loop biomass, open loop biomass, animal waste nutrients, landfill gas, municipal solid waste, geothermal and hydropower. The PTC provides up to a 2.1 cent/kWh tax credit that can be deducted from the federal income tax owed by for-profit entities. Electric co-ops pay state and local taxes, but as not-for-profit utilities, they do not have the federal income tax liability they would need to utilize the PTC.
Without incentives designed for the co-op business model, renewable generation is simply unaffordable for most electric cooperative consumers. The significant capital expense of developing these resources is compounded by the fact that electric cooperatives serve by far the lowest average number of consumers per mile of distribution line among the three utility sectors. This translates to the lowest revenue per mile— making co-op consumers particularly sensitive to the cost of new generation resources.
NRECA is the national service organization for more than 900 not-for-profit rural electric cooperatives and public power districts providing retail electric service to more than 42 million consumers in 47 states and whose retail sales account for approximately 12 percent of total electricity sales in the United States.