AEE's Kreamer Calls on Congress to Switch Clean Energy Tax Credits to Direct Pay
March 24, 2020 -- National business group Advanced Energy Economy (AEE) has sent a letter to congressional leadership urging them to convert renewable energy tax credits to direct payment in order to support clean energy development in the face of disruptions caused by the COVID-19 pandemic, and to make the switch to direct payment permanent. This no-cost action would bolster liquidity in financing as the U.S. Congress works to support the economy during an unprecedented public health crisis.
Signed by AEE CEO Nat Kreamer, co-founder of rooftop solar leader SunRun and chairman emeritus of the Solar Energy Industries Association, the letter notes that advanced energy, which employs 3.5 million U.S. workers, is 'one of America's fastest growing industries, but the economic disruption from COVID-19 is grinding key parts of our industry to a halt.'
To specifically address the jeopardy to project development due to uncertainty in financing, the letter asks Congress to change the law such that 'tax credits for all eligible Section 48 technologies receive 100% direct pay permanently to facilitate their continued construction and avoid further disruption of our industry.' Additionally, AEE asks Congress to extend 'start construction' and 'safe harbor' project deadlines to qualify for tax credits to accommodate pandemic-related disruptions happening now.
'When the economy suddenly grinds to a halt, as with the COVID-19 pandemic now, the banks that dominate the market for tax credits forecast little tax liability to be offset - and the tax credits become worthless,' said Kreamer, who also served as CEO of Spruce Finance and its predecessor Clean Power Finance. 'Consequently, projects on the drawing board for solar, wind, fuel cells, and energy storage get put on hold, or cancelled altogether. Jobs are lost, companies implode, and consumers as well as businesses pay more for energy.'
'Congress can fix this by converting all Section 48 tax credits to 100% direct payment, and making the change permanent,' said Kreamer.
Kreamer noted that, unlike other actions needed to alleviate the economic impact of the pandemic, the switch to direct payment would be no-cost; the federal support would simply take the form of budgetary expenditure, instead of foregone tax revenue. This was done, on a temporary basis, in response to the 2009 Great Recession, with great success.
In the letter, AEE also asks Congress to extend start-construction and 'safe harbor' deadlines to qualify for eligible tax credits to accommodate pandemic-related disruptions happening now.
'Projects should not lose eligibility for crucial financing due to the kind of delays that are rippling through the economy right now,' said Kreamer. 'But extending eligibility will mean little if the tax credits themselves lose their value. Permanent direct pay solves that problem.'
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