Dive Brief:

• A new coalition of more than 350 environmental groups, renewable energy companies and minority advocates is pushing for House Democrats to maintain tax language increasing clean energy access for low-income communities in the budget reconciliation package. 
• The House Ways and Means Committee last week passed the tax language of the $3.5 trillion budget reconciliation bill, which included extensions of the investment tax credit (ITC) and production tax credit (PTC) for solar and wind energy. The package would also boost tax credits for projects built near low-income and environmental justice communities.
• The new coalition, Residential Renewables for All, is pushing for Democrats to expand tax credits for residential clean energy purchases by making them either refundable or direct pay. “Without the direct pay option, the benefits of the residential tax credit tends to only benefit higher income households,” said Chelsea Barnes, legislative director for West Virginia-based Appalachian Voices.

Dive Insight:

The House tax package would be a major step towards Democrats’ goal of producing 80% of the nation’s electricity from clean energy sources by 2030. The ITC and PTC would be extended through 2033, with added credits for facilities using domestic materials and union labor. The bill would also expand credits for energy efficiency improvements, zero-emission nuclear power production and electric vehicle purchases. 

However, Barnes said advocates were disappointed to not see direct pay for the solar ITC for residential customers under section 25D. A recent working paper from the Rand Corp. found that the current structure of the program limits its availability for households and businesses with lower tax burdens. With the bottom 50% of U.S. income earners paying an average of $626 per year for electricity, it would take at least seven years to monetize the tax credit under the current structure.

“Millions of households are currently unable to benefit from that tax credit and without that credit, it takes too long to break even,” said Barnes. “This could be a way to address those inequities and the energy burden facing low-income communities.”

Appalachian Voices is one of the members of the Residential Renewables for All coalition, which launched this month to promote 25D reforms during the budget reconciliation debate. The coalition also includes the NAACP, Black Owners of Solar Services, National Wildlife Federation, Solar United Neighbors and other clean energy groups. 

Senate Finance Committee Chairman Ron Wyden, D-Ore., has indicated his committee, which will write the upper chamber’s tax language, would rely on the Clean Energy for America Act, which passed the committee in May. That bill would create technology-neutral tax credits for projects that meet certain emissions reduction and labor requirements, coupled with incentives for energy efficiency technology and electric vehicles. 

The House bill also expands the ITC for solar projects that serve certain low-income communities. Projects can receive an additional 10% credit for being located in a low-income community and an additional 20% for being part of a qualifying low-income residential building project or economic benefit project. That credit increase for the section 48 ITC has a capacity limitation of 1.8 GW per year through 2031, with any unused capacity rolling over to the following year. A similar incentive is in the Senate bill.

The bill also creates a refundable competitive credit of $1 billion per year for higher education institutions working on environmental justice programs.

As Democrats combine committee language to assemble the budget reconciliation bill — and possibly pare the bill’s size down to gain the support of moderates — environmental groups say they’ll continue to fight for clean energy language that benefits environmental justice communities. In a statement, Sierra Club legislative director Melinda Pierce said the bill could “alleviate some of the pollution impacts that have been borne by communities and help the country build back better.”

“The tax package will serve as a major driver of climate action and clean energy deployment at a scale that can truly transform the way we power our economy — our homes, buildings and transportation sector — while protecting public health by cleaning up our air and water,” Pierce said.