To encourage greater investment in renewable energies, the government established the ITC (investment tax credit). This credit, which is issued in cash grants, encourages the development new types of renewable energies that aren't covered by existing laws. The ITC can be more advantageous for offshore wind power than the PTC. Congress recently amended the tax code so that offshore wind is eligible for ITC. America's prosperity depends on strong investments in renewable energy.
Subsidy subsidies
Some people support subsidies for renewable energy. But others don't. Those who favor the subsidies cite their health benefits and the need to make a transition to a low-carbon world. Some argue that they should be removed because renewable energy sources can compete with traditional forms.
For using fossil fuels, there are enormous subsidies. Since FY 2017, subsidies for renewable energy decreased by nearly 45% compared to their peak in FY 2017. This doesn't mean renewable energy subsidies are gone. In fact, a recent report shows that fossil fuel subsidies are rebounding. The amount of subsidies given to fossil fuels has increased each year by 5% and is projected to rise to almost 7 percent by 2025. That rise is partly due to rising fuel consumption in developing countries, which is expected to continue to increase the use of fossil fuels.
Credit for investment taxes
The government's Renewable Energy Investment Tax Credit (ITC) program provides incentives for renewable energy projects. The deadline for placing solar projects in service is currently December 31, 2036. A new legislative recommendation will change that deadline to allow solar projects to be placed into service sooner. It also provides incentives for those projects that take more time. Solar projects that enter service after December 31st, 2036 may see their ITC increase by as much as four percentage points.
The act provides tax incentives for electric and hydrogen-fueled vehicles, energy efficiency, biofuels, carbon sequestration, and nuclear power. The act also provides for additional grant programs for offshore wind and interregional transmission projects.
Treasury cash grant program
Treasury cash grants for government renewable energy policies are a way for governments to finance energy projects. The cash grants replace the ITC and PTC, so the taxpayer can not claim them. For cash grants to be granted, projects must meet a number of eligibility requirements. If a project does not meet those requirements, it could be disqualified. Treasury guidance materials make this clear.
The cash grants will only be awarded 60 days after an application has been submitted. However, applications for projects that will not be placed in service in 2009 or 2010 must be reviewed and approved by Treasury. In addition, supplemental information must be submitted within ninety days of the date the project is placed into service.
Development of renewable energie zones
Australia's state governments have made it a priority to develop renewable energy zones. These government-controlled statutory authorities are responsible for coordinating REZ projects, taking a holistic approach to planning and development, and working with communities to ensure benefits are shared. The REZs can be a powerful tool in grid-connected renewable energy development.
Development of renewable energy zones will require significant public funding that cannot be provided by the private sector alone. However, governmental intervention in the early stages of deployment can help mitigate financing and market risks and effectively leverage private sector investment. Venture capital firms can also finance projects, although they typically have a three to seven year investment timeframe. This is insufficient for large-scale deployments.