Clean-energy advocates on alert after Senate vote to kill ethanol subsidies

Lobbyists for renewable energy are on heightened alert following a recent Senate vote to end subsidies for ethanol, concerned that breaks for their industry might be next.

Groups supporting wind, solar and other energy sources are ready to spring into action if their preferred tax breaks are threatened in a deal to raise the federal debt ceiling. 

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“We believe we can make the case,” said Denise Bode, the chief executive of the American Wind Energy Association. “I’m not worried that we were going to be thrown by the wayside in some big political battle, because we have such a compelling policy argument to make.”

Industry observers on and off K Street say renewables have reason to be vigilant, especially with clues over the direction of the debt talks hard to come by.

Democrats have been supportive of providing tax help to renewable energy sources even as they have targeted the breaks given to the oil-and-gas industry. 

But Democrats are also adamant that tax revenues be included in any deficit-reduction deal. A majority of senators from both parties voted this month to eliminate a credit for ethanol blending.

Key Republicans such as Sen. Lamar Alexander (Tenn.) have called for taking a look at the subsidies for renewable energy, making the case that the industry gets more help from the government than the largest oil-and-gas producers.

“You would have to be naïve to think that just because you’re renewable that you’re safe,” said an energy source.

According to a Congressional Research Service analysis from this year, renewables accounted for just over 10 percent of the country’s energy production in 2009 while receiving roughly three-quarters of energy tax incentives.

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Fossil fuels, on the other hand, received 13 percent of the incentives while providing close to 80 percent of production.

Alexander cites those statistics to make the case that federal support for renewables is out of whack. But industry defenders and representatives say the amount of government assistance is appropriate.

James Warner of the Fuel Cell and Hydrogen Energy Association said tax incentives for his sector strengthen national security and keep an emerging American industry in line with foreign competitors. Warner added that more traditional energy sources, like oil and gas, have enjoyed longstanding tax support from Congress.

“We are not taking the position that other industries should be brought down,” Warner said. “It’s just if you’re going to point the finger at us or other up-and-coming industries because subsidies are bad, that would be a disingenuous energy policy and ignores history.”

But Warner also indicated that, given gaping deficits and the calls for a tax code overhaul, the mood in Washington appears to have turned against tax expenditures.

“That’s unfortunate, because tax incentives could be useful here,” he said.

Sen. Ron Wyden (D-Ore.), a member of both the Finance and Energy committees, told The Hill that there will likely be a time in the future when government assistance to renewables can be reduced.

“There’s going to be a debate about whether or not particularly promising new technologies ought to have the chance to have a bit of a support at the outset to let them get off the ground,” Wyden said.

Wind, solar and other renewable energy sources could also be helped by a continuing showdown between Democrats and Republicans over whether to scrap certain tax credits and deductions to help reduce deficits.

On Wednesday, Senate Democrats continued to call for using $2 billion to $3 billion in savings from eliminating the ethanol credit in a package to raise the debt ceiling.

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But Republican lawmakers are skeptical of that idea, reiterating their belief that spending is the root cause of the country’s fiscal problems.

GOP senators add that either so-called tax expenditures should be examined in a broader push for tax reform or that there is not enough time to deal with them in an agreement to raise the debt ceiling, which the Treasury Department says needs to be done by Aug. 2.

Sen. John Cornyn (R-Texas) told reporters Wednesday that tax credits and deductions should not be looked at “in a highly politicized and discriminatory sort of way,” but that subsidies for wind, biofuels and solar should eventually be put under the microscope.

“I just think we ought to look at all of it,” Cornyn said.

With all that in mind, some groups in the energy world are taking a wait-and-see approach to the debt talks.

“There are a lot of proposals within debt-ceiling talks, many preliminary in nature, including this one. We’ll likely meet with lawmakers after recess and assess if things are more substantive at that time,” said John Keeley, a spokesman for the Nuclear Energy Institute.