In the wake of the recent mid-term elections, it can fairly be said that little is certain but death, taxes, and that at January's State of the Union address President Obama will prominently call for increasing the nation's production of renewable energy. This policy goal has become an annual right of passage for Presidents of both parties. A quick glance around the House chamber will once again reveal that this statement will receive a unanimous standing ovation from all Congressional members present — after all, even in this election cycle, is there anyone opposed to renewable energy? And yet, when it comes to actually enacting legislation designed to achieve the stated policy goal, there are differences that emerge based on fiscal ideology, geographic disparities, and other key issues. How will these differences be approached by a new Congress where Republicans have regained the majority in the House of Representatives and added new members to the still Democratic-controlled Senate? Where will the Administration and the Republican party focus their efforts?
Renewable Electricity Standard (RES)
It is a safe assumption that there will be no appetite for consideration of comprehensive climate legislation (i.e. cap-and-trade) in the next Congress. However, it is entirely possible that the White House and a bipartisan group in Congress will place a national Renewable Electricity Standard (RES) on the legislative agenda. Evidence of this can already be seen in recent pre-election statements from President Obama who, acknowledging the dim possibilities for major energy legislation, discussed passing a "series of more bite-sized pieces that have to do with renewable energy standards[.]" This statement dovetails with the recent bill proposed by Senator Jeff Bingaman, the Chairman of the Senate Energy and Natural Resources Committee, and 32 bipartisan cosponsors, which would require utilities nationwide to have 15% of their electricity generated from renewable energy sources by 2021. Ultimately, enactment of a national RES, even with these initial expressions of support, remains a long shot due to concerns over increased consumer costs and regional disparities in access to renewable power sources.
The next Congress is also likely to consider several major renewable energy taxes that expired at the end of 2009 or will expire at the end of 2010. The biodiesel tax credit expired at the end of 2009. In addition, the ethanol tax credit and ethanol import tariff expire at the end of 2010. The ethanol industry has developed a smaller blenders credit that changes to a refundable producer credit and an elimination of the ethanol import tariff in 2012. This proposal was recently presented to staff of the tax writing committees and it will get some consideration. Other items being considered include an increase in the manufacturers tax credit (section 48C) to expand or modify facilities that manufacture renewable products and an extension of the direct payment in lieu of the production tax credit for renewable energy projects established under the American Recovery and Reinvestment Act of 2009 (the "Recovery Act")
Funding for Renewable Energy Projects
Perhaps the most dominant theme to emerge from the mid-term elections was a backlash against government spending and the state of the national debt. Republicans nationwide ran on promises to return to their traditional ideology of fiscal conservatism (i.e., reduced government spending and lower tax rates on individuals and businesses). Against this backdrop, how will the next Congress address government funding for renewable energy projects that rose to unprecedented levels with the passage of the Recovery Act? To some extent, they will not have to since a sizeable portion of federal assistance from the Recovery Act remains available under the U.S. Department of Energy's Loan Guarantee Program, the Advanced Research Projects Agency-Energy (ARPA-E) and other programs.
As to funding levels in the next budgetary period, the answer is that, due to its bipartisan support, domestic spending on renewable energy is likely to fair better than most other areas of the federal budget. The White House and Democrats have an enormous incentive to cast themselves as the driving force behind a resurgent clean energy economy — a theme they have driven since 2008. For their part, Republicans have also favored funding renewable energy projects — so long as they are part of an "all of the above" approach to the nation's energy supply. Accordingly, while funding levels will certainly not approach those reached under the Recovery Act, the next Congress will continue to unite around federal support for renewable energy projects.