We may soon witness an interesting clash between the two main forces driving development and acceptance of renewable energy sources. Business leaders and politicians are at odds over tax credits for alternate energy technologies due to expire in December--a collision that could derail important investment in renewables at a critical time. Historically, these tax credits have created necessary industry incentives for manufacturers to increase R&D in new technologies, as well as provide the economic incentive for builders and homeowners to install alternate energy systems on their homes--improving the return on investment to the point of viability.
At the same time that we see mainstream energy companies, including oil suppliers and utility corporations, increasing their move into renewables like wind, solar, geothermal, and biofuel, it looks like Congress will block extension of investment tax incentives beyond year's end. This would effectively kill the contributions needed from these technologies as part of an overall energy strategy that could lead us into a less oil-dependent future. Tax credits for renewable energy technologies are an investment in our energy future, akin to subsidies paid for decades to oil developers for exploration and technological development. And especially now, when we face complex supply challenges and serious environmental realities, we should create and deliver a sustainable energy mix for our country.
So now is the time to extend the credits, not kill them. And it's not just environmentalists who think so. How many television ads have you seen this year showcasing windmills and solar panels? Have you noticed the companies producing them? They are the titans of oil and gas--right down to T. Boone Pickens and British Petroleum, which changed its nickname "BP" to stand for "Beyond Petroleum."
It will be interesting to see how politicians fare against the new alternate energy advocates--major oil and utilities--that are investing heavily in these technologies and want to pave the way for their futures. There's a lot at stake for these companies as they make the transition from fossil fuels to renewables. They see the writing on the wall in terms of changing direction, but they also see a huge market waiting for the new energy products and services they are developing. Tax credits are key to their continued commitments; in fact, Navigant Consulting estimates that killing the credits would drop 2009 investments in renewables from $26.6 billion down to $7 billion.
We can't afford a setback like this at a time when renewable energy is on the verge of making significant contributions to overall energy resources, and at a time when the building industry is making great progress in bringing alternate energy systems into the mainstream. Now is the time to accelerate our R&D by increasing the incentives to bring these technologies to the mass market, and encourage the building industry and its customers to embrace and install them.
Rick Schwolsky is Editor in Chief of EcoHome.