The Renewable Electricity Production Tax Credit (PTC), originally enacted under the Energy Policy Act of 1992, is one of the most important federal incentives for the installation of renewable energy projects in the US. The PTC, in its current form, provides a $0.02/kilowatt-hour tax credit for renewable generation from wind, closed-loop biomass, and geothermal and a $0.01/ kilowatt-hour tax credit for other technologies such as open-loop biomass, landfill gas, and hydropower. The PTC effectively expires on December 31, 2008.

In response to the increasing importance of renewable generation as part of the US energy mix, the House approved H.R. 6049, the Energy and Jobs Creation Act, earlier this week. The Act “extends for one year the tax credit for renewable energy production from various qualifying facilities, including wind, biomass, geothermal, and hydropower facilities, and adds facilities that generate electricity from renewable marine sources, such as tides and waves, to the list of those eligible for the production credit,” according to the Congressional Budget Office.

Although the bill contains billions in extended tax credits and incentives for popular alternative energy programs, such as the Production Tax Credit, the President has vowed a veto. The veto threat comes down to basic ideological schisms between the White House and the Democratic Congress. First, the Democrats pay-go rules mandate that for every tax cut the revenue must be made up elsewhere. The White House rejects this reasoning, arguing that tax cuts grow the economy in any case so “pay fors” are not necessary. Second, the bill contains a deferred tax on foreign interest income that the White House also objects to. Finally, the White House is opposed to the inclusion of Davis-Bacon work rules in the bill. These are a bête noire for the GOP and mandate prevailing wage rates for construction. The White House’s veto threat can be read online.

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