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The Wind Blows, the Sun Shines: The Tax Breaks

Ten years ago, the renewable energy industry basked in political popularity. With the rise of the Tea Party, it is now under fire. Clean energy advocates will spend part of the legislative session fending off attacks. But they also have some big dreams.

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Behind the attention that has gone to the state’s extraordinary oil and gas boom, renewable energy clings to its foothold. New figures show that Texas remains the top-ranked wind-power state, and high hopes exist for solar development.

But the legislative session will see renewable energy largely playing defense. The industry’s political popularity peaked roughly a decade ago. George W. Bush signed the state’s first renewable energy mandate in 1999, and Gov. Rick Perry signed an expansion of it in 2005. With approval from the 2005 Legislature, nearly $7 billion in transmission lines are being built across the state to aid wind power.

Wind power’s popularity ebbed with the rise of the Tea Party and the era of cheap natural gas, and now even the underpinning of Texas wind — the 2005 renewable energy mandate — is under attack. The Public Utility Commission, in a January report to the Legislature, said that the mandate “is no longer necessary” and recommended its repeal. Wind power has exceeded the mandate, but its advocates fear the symbolism that a discussion of repeal would bring. (The PUC recommended maintaining a program of renewable energy credits, which are related to the mandate and continue to be used.)

No legislation has yet been filed to repeal the renewable energy mandate, often called a “renewable portfolio standard,” but advocates are worried. “There’s a lot of concern out there about bad legislation. I think the PUC’s proposal is incredibly misguided,” said Colin Meehan, an energy analyst with the Environmental Defense Fund. The renewable energy mandate, he said, has been “one of the most successful policies in Texas.”

The industry is also worried about a political attack on the wind-power transmission lines, known as CREZ, which are costing the state nearly $7 billion and are due to be completed by the end of the year. However, no legislation has been filed on this to date.

The wind industry’s most important fight, however, may be over an extension of an economic development provision of the tax code that has aided most wind farms in the state. The provision, known as Chapter 313, results in lower property taxes for wind farms, which offer payments in lieu of higher taxes directly to local school districts. The provision, which has benefited manufacturing plants as well as wind farms, expires in 2014.

“Our message is that wind, especially in rural Texas, has had a tremendous impact on local economies,” said Jeffrey Clark, executive director of the Wind Coalition, a regional advocacy group. Other states, including Oklahoma and Nebraska, have similar economic development incentives in place, he said. State Rep. Craig Eiland, D-Texas City, has filed a bill (HB 621) to extend the tax incentive until 2024.

On the solar side, advocates will be hoping against hope for a mandate to encourage “non-wind” renewables. Solar costs have plummeted, but with abundant natural gas keeping prices low, few communities besides San Antonio are moving forward with major solar projects. HB 723, filed by Rep. Rafael Anchia, D-Dallas, would set a goal of 1,500 Megawatts of new non-wind renewables projects by January 2022.

“I’m really excited about making the case” for solar, said Anchia.

A spokesman for State Rep. Drew Darby, R-San Angelo, said Darby currently does not have plans to re-file a solar bill that would have created a statewide solar rebate program through fees on electric bills. (Similar legislation failed to pass last session.) SB 305, by State Sen. Jose Rodríguez, D-El Paso, would create a sales tax exemption for solar devices.

HB 303, filed by State Rep. Eddie Rodriguez, D-Austin, would require the state to get 35 percent of its electrical capacity from renewable energy by 2020, with 2 percent of the total from solar.

State Rep. Mark Strama, D-Austin, plans to file a bill to provide grants to schools for putting solar panels on their rooftops. The bill would raise money through a surcharge on electric bills that is inversely indexed to power rates, so that if rates go up, the surcharge falls. He also plans to file legislation that would help small-scale solar — like rooftop panels — get financial credit for putting extra energy (beyond what the building uses) onto the electric grid. It’s a concept sometimes called “net metering.”

“Recognizing political realities here, both will be modest proposals and therefore I have some hope of being able to pass them,” Strama wrote in an email. Anchia said he is also looking at net metering issues.

Meehan of EDF said that net metering had been an issue before the Legislature for the last two sessions, and “a lot of headway has been made.”

Renewable energy is also expected to be part of broader discussions at the Legislature about the state’s strained power grid, and also about ensuring adequate water supplies. Wind power and photovoltaic solar panels operate without the need for water, and encouraging “resources that do not consume a lot of water would be a wise thing to do,” said Russel Smith, executive director of the Texas Renewable Energy Industries Association.

Anchia said that when state regulatory agencies evaluate the cost of energy, he’d like them to include water in that cost. “It’s a precious and dwindling commodity,” he said. Anchia said he was also looking into “creating a larger demand response program.” He was referring to the idea of incentivizing Texans to cut power use at peak times. He was especially interested in helping ordinary Texas residents (as well as businesses) participate.

Another big hope of renewable power advocates this session will be a bill for a program known as PACE, short for Property-Assessed Clean Energy. The idea of PACE is to allow building owners to pay for energy improvements through increased property taxes — thus avoiding the high up-front costs often associated with adding insulation or solar panels. But the program needs additional dismantling of legal hurdles to work in Texas.

In addition to its environmental benefits, the PACE program is “an amazing economic development opportunity,” said Charlene Heydinger, executive director of Keeping PACE in Texas, an advocacy group.

Sen. John Carona, R-Dallas, who chairs the Business & Commerce Committee, will file a PACE bill, Steven Polunsky in his office confirmed. However, details were still being worked out. (Carona has also already filed a bill, SB 241, that would allow Texans to opt out of having smart electric meters in their homes, at a cost.)

Anchia said he was also looking into PACE legislation.

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