Speeches & Floor Statements

Floor Remarks of U.S. Senator Lamar Alexander (R-TN) on "Tax Credits for Renewable Sources of Electricity"

Posted on April 9, 2008

I thank the Senator from Nevada for his comments, and I thank him for his effort. He and the Senator from Washington, Ms. Cantwell, are making a constructive effort to give Federal support for emerging renewable energy. Clean renewable energy is very important for our country. I have a chart here which lists the sources of renewable electricity qualified to receive the production tax credit. This production tax credit is the subject, in part, of the Ensign-Cantwell amendment No. 4419. But what Senator Kyl and I have is a second-degree amendment No. 4429 that we will offer when the Ensign-Cantwell amendment comes up, which is a way to improve that amendment. Basically, what we have been hearing from entrepreneurs and those who are inventing new technologies, which would help reduce our dependence on fossil fuels, is: We need some certainty in whatever support you give us from the Federal Government. The Ensign-Cantwell amendment would -- the first part of it -- would allocate about $3 billion to the production tax credit for 1 more year. It would extend the ability of renewable electricity to qualify for the production tax credit. What we would say is, let's do that for 2 more years. I will explain that in just a minute. One might say: Well, how are you going to pay for that? The way we would propose paying for it is to put wind in the same category as emerging renewable energies, make it also available for a 1-cent subsidy per kilowatt hour, and that amount of money alone would make it possible for us to have a 2-year extension of the production tax credit at the same cost that Senator Ensign and Senator Cantwell propose in their amendment. Now, let me explain what I mean by that. But first, our goal with the Alexander-Kyl amendment would be to extend the production tax credit for 2 years, to focus it on emerging renewable electricity technologies, to focus it on those that have a capacity for supplying baseload electricity; in other words, electricity production that we can rely on all day and all night. If you want to turn your light on in the middle of the night or operate your computer at 4 p.m., whether the sun is shining or the wind is blowing, you need reliable sources of baseload electricity, and we would like to treat all of these energies fairly. Here is what the law now does and has done since 1992. It pays the producer of this kind of electricity, renewable electricity, 2 cents per kilowatt hour for the electricity it produces. Right now, the 2 cents is going to closed-loop biomass and to geothermal; that is heat coming out of the ground and is being converted into clean electricity. It used to go to solar, but that was removed in 2005, and it goes to wind today. So those three -- closed-loop biomass, geothermal, and wind -- all get 2 cents per kilowatt hour. These other emerging technologies on this side of the chart just get 1 cent per kilowatt hour. What we propose to do is move wind from the two-cent category to the one-cent category. Wind would still get 1 cent per kilowatt hour. It would end up getting more of the money than any of these others, but it would focus more of the dollars in the Cantwell-Ensign bill on emerging baseload energy by providing more time for these to be developed. Now, that is not as complicated as it sounds. Let me try to say why it is necessary to do this. Most of the speeches we hear around here about the production tax credit say: Oh, we need to have renewable energy. We need to have everything. We need to have biomass. We need to have small irrigation power. We need to have landfill gas. We need to have trash combustion, qualified hydropower, and now wave and tidal. That is new. That is when you put a turbine in the East River in New York City and the water turns the turbines instead of the wind. It turns out there is more power in the water. In fact, it destroyed the turbines, so they are going to have to start over again. But these are emerging experimental technologies. So we say on the Senate floor that we are going to have all of these renewable generating sources, but the fact is we don't do that. We are now committed to $11.5 billion in tax expenditures, according to the Joint Tax Committee, on wind power alone over the next 10 years -- $11.5 billion on wind power alone. By adopting the Ensign-Cantwell amendment, based on my best estimates, we would add another $3 billion over the next 10 years to wind alone, and almost none of it would go over here to these other renewable electricity technologies. Now, why would I say that? It is because a new report by the Energy Information Administration, which I requested in May 2007 and received this week, said that wind power accounted for 97 percent of the total renewable electricity production tax credit in fiscal year 2007. Now, Senator Bingaman said earlier when we debated the Energy bill in June 2007 that he relied on the figure that 75 percent of all of the production tax credit was being used for wind power. That was an estimate from last year from the Joint Committee on Taxation. But the Energy Information Administration in this new report says that wind received 97 percent of the production tax credit in Fiscal Year 2007. I am not saying wind power is good or wind power is bad by saying this; I am saying if you are saying with the Ensign-Cantwell amendment that you are offering support for all of these different emerging technologies, that is not going to be the case because according to the Energy Information Administration, 97 percent of it went for wind. Wind has another difference with all of these: the issue of supplying baseload power. The problem with wind is the limitation on it. Each one of these has some limitation, but one of wind's limitations is you can only use it when the wind blows. You don't store wind power; you use it when the wind blows. So if you are the city of Los Angeles or you are the city of Little Rock or the city of Nashville and it is 4 o'clock in the afternoon and you want to turn on your air-conditioners and operate your computer and turn on your light when you hear a noise, you don't want to first check to see whether the wind is blowing. So it is not a baseload power, it is not a controllable power source. It has a severe limitation. Now, solar had much the same limitation when it was -- insofar as the technology has developed so far. For solar, we generally buy panels and put them on the roof and we use the electricity that comes from the panels, and that can be very useful, just as wind mills have always been useful on farms for occasional power. But the solar industry requested to be taken out of this production tax credit because it wasn't getting any of it. It was all going to wind. Now there is another provision for an investment tax credit for solar. Extending this investment tax credit is in the Ensign amendment. I fully support that. That would help, for example, new solar thermal plants where you put a lot of mirrors out on the ground, collect the Sun, create steam, put the steam in the ground, and then you can use it on a continuous basis, not just when the Sun shines. Pacific Gas and Electric has a commercial plant that they are going to build out West for that. Let's see if it works. If it does, it will be a great thing for our country. We only have a limited amount of money available to support emerging renewable energy, so why would we spend virtually all of it -- 97 percent -- for a proven technology -- wind power -- that we have been subsidizing since 1992 and to which we have committed $11.5 billion over the next 10 years, if we don't do anything else, just the wind power. And, with the Ensign-Cantwell amendment, we are about to put in another $3 billion for wind power over the next ten years, acting as if we are also doing it for open-looped biomass, small irrigation power, landfill gas, trash combustion, qualified hydropower, wave and tidal, and it won't get anything. It will all go to these big wind turbines. Let me go to another chart and give an example of what this has produced. We hear a lot of talk about Federal subsidies for oil and Federal subsidies for coal and Federal subsidies for this and that, and the oil companies are called up and everybody gets excited because we are talking about $3.50, $4 for gasoline. We have a right to be excited about that. We don't like to send our gas money overseas to people who are trying to kill us, so we are upset about that. But we are talking here about Federal subsidies for electricity, not gasoline. I asked the Energy Information Administration in May 2007 to please tell me what is the Federal taxpayer doing to support the different ways we produce electricity in the country. The information came back this week, and it is really pretty interesting. Coal. Coal is half of all of the electricity we use in the United States. We are not a desert island. We use 25 percent of all of the energy in the world. If we are going to be realistic about it, we need to find a way to burn coal cleanly, which means we need to recapture the carbon if we care about climate change. But right now, we subsidize coal to the tune of 44 cents per megawatt hour. We may not know what a megawatt hour is, but we can compare it to what we do for others. Refined coal is a very small part of coal, and it gets a very high subsidy. That is very interesting. I didn't know about that. That is a special subsidy which was put in for refined coal, but almost all the coal we burn gets 44 cents. Natural gas. Almost all the plants built to make new electricity in the 1990s were natural gas and petroleum. That is oil and gas. We assume it gets a lot of subsidies. It only gets 25 cents for a megawatt hour. Nuclear power. Nuclear plants generate 19 percent of all our electricity in America, but they are 70 percent of all our clean electricity. If we want to have clean air and to deal with climate change in this generation, nuclear power -- other than conservation -- is our best option because, with that, you have no nitrogen, no sulfur, and no mercury, which dirties the air, and you have no carbon. So 70 percent of our carbon-free electricity comes from nuclear power. How do we subsidize nuclear power? EIA?s report says $1.59 per megawatt hour in Fiscal Year 2007? Biomass is a new renewable energy, which gets 89 cents. Geothermal. They are interesting new technologies that drill way down into the ground and out comes heat and you can heat your house from that. That is 92 cents per kilowatt hour. Hydroelectric, which is water over the dams. It is about 7 percent of all the electricity in America. It is clean, but you and I know how many new dams are going to be built. Not many more. Subsidizing that will not solve the problem of clean electricity for a country that uses 25 percent of all the electricity in the world. Solar is misleading. We are subsidizing it at the rate of $24 per megawatt hour, about 50 times that for coal. That is an infinitesimal amount for electricity. We don't sell much solar electricity to the grid today. It is from solar panels put on the roof. Then we have wind. That $11.5 billion we are already committed to spend to help developers build wind turbines all over America in places where it blows or doesn't blow, we are subsidizing the electricity produced by those wind turbines at the rate of $23 a megawatt hour in Fiscal Year 2007, while coal is less than a half dollar. That is 50 times the subsidy for coal. It is $1.59 for nuclear -- 70 percent of our clean energy -- and wind is 2 percent of our clean energy. If we were subsidizing nuclear power at the same rate as wind, it would cost us $300 billion over the next 10 years. We don't have that much money in the United States with which to subsidize electricity. So go all the way down to the bottom, past landfill gas and municipal solid waste, and I have talked about that before. In Johnson City, TN, a company is using the landfill there and paying Johnson City a million dollars a year for that purpose because it produces electricity, and Johnson City is keeping its property taxes lower. It is worth, perhaps, subsidizing that a while longer. We are doing that at the rate of 13 cents per megawatt hour. All renewables -- and this is supposed to be a bill about encouraging renewables -- are being subsidized at $2.80 per megawatt hour. Yet the Ensign-Cantwell legislation would add $3 billion to wind power, which is already being subsidized at $24 per megawatt hour. That is not a wise stewardship of dollars. What Senator Kyl and I are seeking to do is improve the Ensign-Cantwell bill. The objective there, if I can go back to the other chart, is this. The objective is to identify some of these emerging renewable technologies that have the capacity to turn into base-load technologies and encourage them. They are more likely to be encouraged if we give them a 2-year extension for the production tax credit instead of 1 year. That is what we would do. They are more likely to get some of the money if we don't let wind gobble it all up, as it did last year. Why give $3 billion more to a proven technology when our goal is to support emerging technology? That is what we are trying to do. If the Senate would like to resolve the gridlock and spend $6 billion or $7 billion in support of helping us find ways to encourage new emerging base-load technologies, the way to do that would be to support Ensign-Cantwell as amended by Alexander-Kyl. Wind is getting $11.5 billion over 10 years, plus many other subsidies. With the Alexander-Kyl amendment, wind would get 1 cent per kilowatt hour and most of the $3 billion we are talking about over a longer, two-year period. But some of these other emerging renewable energies would have a fighting chance to get some of the money because they would have more time to plan and invest. I have been visited by a lot of people who want to see some support for renewable energy. I want to see that too. I was the principal sponsor of the solar energy tax credit, increasing it in 2005. I would like to see solar thermal plants. I would like to see support for open-loop biomass, and small irrigation power, landfill gas, trash combustion, qualified hydropower and wave and tidal. But the Ensign legislation would not do it by extending the production tax credit for 1 year because wind will gobble it all up such as it did last year. The others will have a fighting chance if we extend the production tax credit for 2 years and treat wind like all these other ones, particularly now that it is proven. That is a wiser use of our money and puts us on a better path toward cleaner air and dealing with climate change.