As part of our continuing effort to provide current, topical information relating to renewable energy projects, RenewableEnergyLawInsider provides a series of posts from individuals with a wide range of experience and expertise. Today, Tracy Hammond from the Polsinelli Public Policy Group in Washington D.C. provides an update about the impact that the federal government shutdown will have on renewables in the United States.
The federal government shutdown is now in its fourth day, and there is no quick resolution of the partisan standoff in sight. Both Republicans and Democrats appear to be digging in instead of reaching out, and it is likely that this shutdown could last two to three weeks, with a breakthrough coming only as the U.S. approaches its borrowing limit (or debt ceiling) October 17th.
Although there’s enough speculation, prognosticating and second-guessing to fill volumes; I’ll focus here on how this shutdown will impact renewable energy.
In thee near term, the government shutdown could delay the release of federal renewable fuel requirements for 2014. Renewable fuels stakeholders expected the U.S. EPA to release its proposed targets—levels of conventional and advanced biofuels that must be blended into gasoline and diesel—in mid-October. The release will almost certainly be delayed and the longer the shutdown, the longer the delay. A long delay in the release of the requirements will increase uncertainty in the fuels market, giving critics of the RFS additional opportunities to call for repeal or modifications to the program. A delay will also affect efforts in Congress, where a group of lawmakers from the House Energy and Commerce Committee are crafting legislation to reform the standard. However, their efforts will hinge on what EPA decides to do with its 2014 numbers.
Other rules that could drive renewable energy development, like EPA’s efforts to draft emissions caps for greenhouse gases will also be delayed, making it even more difficult to meet the timeline laid out by President Obama earlier this year.
During the shutdown, many Congressional offices are working with significantly reduced staffs. And with much, if not all, of the attention focused on funding the government and raising the debt ceiling, work is not being done on a host of other legislative priorities. Just one example is the renewable energy Production Tax Credit (PTC), now set to expire in less than three months. In addition to wind, the PTC provides a 2.3 cent-per-kilowatt-hour credit for geothermal energy and closed-loop biomass, and a 1.1 cent-per-kilowatt-hour credit for qualified hydropower facilities, marine and hydrokinetic power, landfill gas, trash combustion, small irrigation power facilities and open-loop biomass. The Congressional Joint Committee on Taxation found that a one-year extension of the tax credit would cost about $6.1 billion over 10 years. A five-year extension would cost roughly $18.5 billion. Given the current budget pressures, these are not insignificant amounts. Without some sort of as-yet-unknown “grand bargain”, it seems very unlikely that the PTC will be extended before the end of 2013.
Because nearly all other legislation has taken a back seat to the funding and debt discussions, the Farm Bill remains in limbo. With no new Farm Bill agreement, programs like the Renewable Energy for America Program (REAP), the Biomass Crop Assistance Program (BCAP) and the Advanced Biorefinery Assistance Program are attempting to operate with only leftover money from previous years. Soon, these programs will expend all of their resources and be forced to shut down until Congress passes a Farm Bill authorizing new funding.
Speaking of REAP, BCAP and other similar programs, with no one at USDA, DOE and other agencies to review and approve applications, no new funds will likely be released to worthy recipients. Projects will be put on hold and construction will stop on efforts to increase energy efficiency and deploy new renewable energy across the country. Although this may only be a short term hiccup lasting a few weeks, delays take a toll on project financing, increase expenses and push off potential completion. As the budget battles continue, federal departments and agencies will almost certainly continue to try to do more with fewer resources—both human and monetary. This trend will inhibit deployment and make it more difficult for deserving projects to move forward.
The first rule of medicine is do no harm. As Congress continues to fail at its most basic task—funding the federal government—renewable energy and those that earn a living in the sector won’t be mistaking their congressional leaders for doctors anytime soon.