Clean Energy for America Act seeks to reform energy tax code, consolidate incentives into emissions-based efforts

A massive attempt to overhaul the federal energy tax code, the Clean Energy for America Act, was introduced to the Senate this week, complete with provisions to consolidate more than 40 energy tax incentives into three emissions-based versions accessible by all technologies.

This one-size-fits-all effort would eliminate sector by sector incentives in favor of incentives that could be given to any energy provider, be they battery storage, solar, or natural gas, provided they meet certain emissions reduction goals. It’s an effort on behalf of Senate Finance Committee Chair Ron Wyden (D-OR) and 24 cosponsors to not only change the existing system but to create new jobs and address climate change.

“Energy policy is tax policy, and the federal tax code is woefully inadequate to address our energy challenges,” Wyden said. “It’s a hodgepodge of more than 40 temporary credits that don’t effectively move us toward the goals of reducing carbon emissions and lowering electricity bills for American families. Simply extending the status quo will not get the job done. The Clean Energy for America Act tosses those 40 temporary credits aside, replacing them with emissions-based, technology-neutral credits to turbocharge investment in clean electricity, clean transportation, and energy conservation.”

The bill would incentivize clean electricity by favoring those facilities with zero or net negative carbon emissions. Eligible new facilities could select either a production tax credit of up to 2.5 cents per kilowatt hour or an investment tax credit of up to 30 percent, and stand-alone investments into critical grid improvements would now qualify for the investment tax credit as well. Power and grid improvement projects would have the option to claim tax credits as direct payments. All clean fuel producers would be required to reach zero or net negative emissions by 2030.

“The American Clean Power Association applauds the collective efforts in Congress to promote economic investment and address climate change,” Heather Zichal, CEO of the American Clean Power Association, said. “Chairman Wyden’s Clean Energy for America Act goes a long way towards addressing both of these pressing needs in America. This bill would be important to deploying more renewable energy and facilitating economic growth and job creation across the country. In addition, this legislation’s focus on transmission infrastructure and project financing flexibility will help enable the U.S. to remain on the cutting edge of clean power development and to deliver additional clean energy to communities across the country.”

“Our customers want a clear and swift path to a clean energy future,” Maria Pope, president and CEO of Portland General Electric, said. “We must all work together to drive this change – with policy being a critical piece. We applaud Sen. Wyden for shifting the traditional way we think about energy tax credits and championing an innovative approach that unleashes all players, including utilities, to invest in clean, reliable, and affordable energy.”

The plan also garnered support from the Edison Electric Institute (EEI), which cited tax policy as a definitive driver for carbon-free technologies such as wind and solar. Making these technologies and advanced renewables more commercially available and affordable customers will be key to promoting long-term clean energy and climate goals among electric companies, EEI President Tom Kuhn said, and praised the technology neutral nature of the bill.

The legislation targets more than just the energy industry, though, and actively encourages clean transportation fuel through incentives for battery and fuel cell electric vehicles and electric vehicle charging. Like with the energy industry, this section would also offer a technology-neutral tax credit for domestic production of clean transportation fuel that is at least 25 percent cleaner than average current standards.

The existing electric vehicle credit would be expanded to include a 30 percent credit for medium and heavy duty electric vehicles. Consumers would also find the new credit refundable.

“We are pleased that Sen. Wyden’s bill recognizes the importance of electrifying transportation to help reduce carbon emissions across the economy and expands the tax credits for electric vehicles and EV infrastructure,” Kuhn said. “These credits will drive further growth in electric transportation, spur manufacturing, and lower costs for consumers while putting even more EVs on U.S. roads.”

More efficient homes and commercial buildings would be incentivized, along with good-paying jobs, as the bill would require those given the incentives to comply with federal labor requirements. The existing storage credit would also be expanded to include transmission investments as a means of hastening grid improvements.

Energy storage could also stand to gain heavily from the legislation, as it includes provisions that would make storage officially eligible for the investment tax credit. It was a fact that did not go unnoticed by the U.S. Energy Storage Association (ESA), which applauded the bill. In a statement, the organization noted the growing attention being given to storage, from President Joe Biden on down.

“Few policies will deploy more energy storage faster across the electric grid than making the ITC available for standalone storage projects. We’ve seen the positive impact of the ITC when it has been made available to other clean energy technologies,” Jason Burwen, ESA Interim CEO, said. “As Congress debates an infrastructure bill, we will work with members in both chambers, in both parties, and other stakeholders to finally enact the ITC for storage—one of the most important technologies for our economic and climate future.”

In its 2030 Vision, the ESA argued that at least 100 GW of new energy storage will be needed to support the clean energy transition and modernize the electric system. Of this, just over 3 GW of battery and other advanced energy storage has been deployed in the United States to date.