House Democrats have released drafts of the energy policies to be included in the upcoming reconciliation bill, from the Clean Electricity Payment Program to a range of tax credits. Let's walk through the details!
An important new "green" energy provision, not mentioned in your article, is "Sec. 136108. Green energy publicly traded partnerships" on page 17 of the Ways & Means Summary. This proposal would allow §45(c)(1) and §48(a)(3) renewable energy property to be owned by publicly traded partnerships such as the Master Limited Partnerships (MLPs). MLPs are a significant source of capital for fossil fuel pipelines, etc. (The current market value of such MLPs is over $500 billion.) The ability to use MLPs is a significant tax subsidy for fossil fuels since MLPs are pass-through structures which pay no corporate tax. Traditionally, renewable energy has been excluded from MLP eligibility. If this provision passes into law, it is likely that we'll find MLPs being used to provide substantial quantities of capital to renewable energy projects. Because an MLP allows one to pass tax benefits, including depreciation, to partners, it is quite possible that MLPs may become preferred alternatives to the tax-equity flip-structures that have become common in the solar and wind space.
Why does the bill propose a green hydrogen tax credit of $3 per kg for 10 years? Seems quite high. According to BNEF, current green hydrogen production costs are $2.50 to $4.50 per kg today. And they project they will be about $1 per kg in 2030. Subsidies are one thing but surely negative pricing is too far? Seems like this will cause the market to use green hydrogen in inefficient ways like in ground transportation and maybe even home heating when using renewable electricity directly would make more sense. Am I missing something?
If there's any possibility of getting rid of fossil fuel subsidies, I would humbly suggest, as a tax accountant, targeting percentage depletion. I know it's not the biggest source of money, especially when oil and gas prices are low, but I think it would be an easier lift politically because it can be explained in ~2 minutes why it's a scam, whereas other giveaways require a long-ish explanation of the time value of money that I don't think people will be willing to sit through.
An important new "green" energy provision, not mentioned in your article, is "Sec. 136108. Green energy publicly traded partnerships" on page 17 of the Ways & Means Summary. This proposal would allow §45(c)(1) and §48(a)(3) renewable energy property to be owned by publicly traded partnerships such as the Master Limited Partnerships (MLPs). MLPs are a significant source of capital for fossil fuel pipelines, etc. (The current market value of such MLPs is over $500 billion.) The ability to use MLPs is a significant tax subsidy for fossil fuels since MLPs are pass-through structures which pay no corporate tax. Traditionally, renewable energy has been excluded from MLP eligibility. If this provision passes into law, it is likely that we'll find MLPs being used to provide substantial quantities of capital to renewable energy projects. Because an MLP allows one to pass tax benefits, including depreciation, to partners, it is quite possible that MLPs may become preferred alternatives to the tax-equity flip-structures that have become common in the solar and wind space.
Here's a more detailed look at the real reason$$$ for Joe Manchin's opposition. https://theintercept.com/2021/09/03/joe-manchin-coal-fossil-fuels-pollution/
Why does the bill propose a green hydrogen tax credit of $3 per kg for 10 years? Seems quite high. According to BNEF, current green hydrogen production costs are $2.50 to $4.50 per kg today. And they project they will be about $1 per kg in 2030. Subsidies are one thing but surely negative pricing is too far? Seems like this will cause the market to use green hydrogen in inefficient ways like in ground transportation and maybe even home heating when using renewable electricity directly would make more sense. Am I missing something?
If there's any possibility of getting rid of fossil fuel subsidies, I would humbly suggest, as a tax accountant, targeting percentage depletion. I know it's not the biggest source of money, especially when oil and gas prices are low, but I think it would be an easier lift politically because it can be explained in ~2 minutes why it's a scam, whereas other giveaways require a long-ish explanation of the time value of money that I don't think people will be willing to sit through.
I would wear a "Repeal IRC § 613 Now!" t-shirt.
The most important part of this article is the last part. Let’s not squabble. Let’s get what we can get done done. Everybody together, push!!