{
  "id": "R43340",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "R43340",
  "active": true,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 428375,
      "date": "2013-12-20",
      "retrieved": "2016-04-06T20:49:26.100333",
      "title": "Production Tax Credit Incentives for Renewable Electricity: Financial Comparison of Selected Policy Options",
      "summary": "Under current law, the production tax credit (PTC) incentive for renewable electricity will expire at the end of 2013. Generally, congressional debate about the PTC falls within a spectrum of options. At one end of the spectrum, proposals have been made to eliminate the incentive. At the other end of the spectrum, proposals include making the PTC permanent. Other proposals, such as temporarily extending and phasing out the PTC over time, fall within these two extremes. This report examines selected alternatives for phasing out PTC incentives. \nDuring the 2012 debate about the future of the PTC, the concept of phasing out PTCs over a period of time was considered as a potential option. In August 2012 the Senate Committee on Finance reported S. 3521, which expressed the sense of the Senate, regarding tax reform, that \u201cwhenever possible, federal energy tax expenditures should be responsibly phased-out in a manner that allows these technologies to function without a reliance on federal subsidies.\u201d This language is not specific to any energy technology, and does not refer to either fossil energy or renewable energy. In December 2012, the American Wind Energy Association published a PTC phase out proposal that would result in the PTC being eliminated by 2019.\nDebate about energy subsidies is multi-faceted. Different energy sources receive different types of subsidy support over varying time periods. Comparing tax incentives and subsidies across all energy types is beyond the scope of this report. \nThis report examines and considers possible options for renewable electricity PTCs, with a focus on phase-out alternatives. Generally, the goal of a tax credit phase-out approach is to reduce the incentive value over a period of time in order to encourage industry to reduce costs so that certain renewable power technologies might compete on an unsubsidized basis. In general, proponents of technology-promoting legislation aim to reduce the cost or price gap between preferred and conventional technologies. Opponents often view this approach as \u201cpicking winners.\u201d\nIf the PTC were extended, Internal Revenue Code Section 45 includes provisions for phasing out the PTC based several parameters. However, a phase-out under current law is unlikely in the near to medium term due to the phase-out design\u2014which is statutorily based on a threshold electricity value that escalates with inflation and a reference price that declines with technology and cost improvements\u2014as well as forecasted electric power market conditions. \nOne phase-out approach under consideration is a linear reduction of PTC incentives each year. For example, the PTC could be reduced from its current level by 20 percentage points each year for five years. After the end of the five-year period, PTCs would no longer be available. This approach is simple conceptually, and may be easy to implement. However, this approach may or may not be effective, depending on market conditions (i.e., electricity prices, wind installation costs, natural gas prices). Alternatively, PTC incentives might also be reduced annually based on a non-linear formulation that incorporates the myriad of market variables that can affect the cost competitiveness of renewable electricity. While this approach is more complex when compared to the straight-line method, it could establish benchmark PTC levels using a comparative metric (e.g., natural gas power). A detailed examination and analysis of this \u201cmarket-linked\u201d phase-out approach is included in this report. Each phase-out approach differs in terms of complexity, implementation, and potential impacts to renewable electricity deployment.\nVarious proposals have been introduced in the 113th Congress that would eliminate the renewable electricity PTC (e.g., November 14, 2013, letter to Committee on Ways and Means from more than 50 House members), permanently extend the PTC (e.g., H.R. 2539, and the President\u2019s FY2014 budget) or phase out the PTC (e.g., H.R. 2081 and H.R. 2987). If Congress chooses to debate the future of the renewable electricity PTC, background and analysis of various policy alternatives may serve to inform discussions about this federal incentive.",
      "type": "CRS Report",
      "typeId": "REPORTS",
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      "topics": []
    }
  ],
  "topics": [
    "Energy Policy"
  ]
}