Supporting Renewables while Saving Taxpayers Money

The report finds that federal incentives were critical for the viability of U.S. wind and solar projects in 2010, bridging roughly half the gap between generation costs and market prices. While cost reductions have made wind nearly viable with federal support alone by 2013, the report argues that current tax-based incentives are inefficient because project developers often lack the tax liabilities to fully utilize them, necessitating costly tax-equity financing. The authors propose replacing the Production Tax Credit (PTC) for wind with a Taxable Cash for Production (TCP) incentive and offering solar PV projects a 20% 1603 Cash Grant instead of a 30% Investment Tax Credit (ITC) to maintain support while significantly reducing costs to federal and state governments.

• Federal incentives were essential for the economic viability of most renewable energy projects financed in 2010, covering approximately 50% of the difference between generation costs and expected market electricity prices.
• Due to the 2008 financial crisis and subsequent state budget constraints, it is unlikely that state governments or ratepayers could have filled the funding gap in the absence of federal support.
• By 2013, a combination of turbine performance improvements and lower contract prices meant that a large wind project could be nearly cost-competitive using only federal incentives, potentially enabling deployment in states without local policy supports.
• Tax-based incentives are inefficient because developers often lack sufficient tax liabilities to use the benefits as they are generated, forcing them to use costly tax-equity financing that only realizes two-thirds of the incentive's value.
• A Taxable Cash for Production (TCP) incentive of $21/MWh for wind would provide the same benefit as the $22/MWh Production Tax Credit (PTC) while reducing the cost to federal and state governments by approximately 40% per MWh.
• For small solar PV projects in 2013, a 14% 1603 Cash Grant could deliver the same benefit as a 30% Investment Tax Credit (ITC) at a 57% lower cost to the government.
• Investment-based incentives (like the ITC or 1603 Cash Grant) shift project performance risks to the government, whereas production-based incentives reward actual performance but expose the government to price-setting risks.

APA

Varadarajan, U., Pierpont, B., Hobbs, A., & Rowley, K. (2012). Supporting Renewables while Saving Taxpayers Money. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2012/09/Supporting-Renewables-while-Saving-Taxpayers-Money.pdf

Chicago

Varadarajan, Uday, Brendan Pierpont, Andrew Hobbs, and Kath Rowley. Supporting Renewables while Saving Taxpayers Money. Climate Policy Initiative, 2012. https://www.climatepolicyinitiative.org/wp-content/uploads/2012/09/Supporting-Renewables-while-Saving-Taxpayers-Money.pdf.

Wikipedia

{{cite report |last1=Varadarajan |first1=Uday |last2=Pierpont |first2=Brendan |last3=Hobbs |first3=Andrew |last4=Rowley |first4=Kath |title=Supporting Renewables while Saving Taxpayers Money |publisher=Climate Policy Initiative |date=September 2012 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2012/09/Supporting-Renewables-while-Saving-Taxpayers-Money.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{varadarajan2012supporting, author = {Varadarajan, Uday and Pierpont, Brendan and Hobbs, Andrew and Rowley, Kath}, title = {{Supporting Renewables while Saving Taxpayers Money}}, institution = {Climate Policy Initiative}, year = {2012}, month = sep, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2012/09/Supporting-Renewables-while-Saving-Taxpayers-Money.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }