Simple Tax Changes Can Unleash Clean Energy Deployment

This report by RMI argues that current US tax regulations create perverse incentives that discourage regulated utilities from deploying clean energy. It proposes two specific policy changes—eliminating tax normalization for the Investment Tax Credit (ITC) and implementing direct pay for tax credits—to align utility financial interests with the goal of 100 percent clean electricity by 2035.

• Despite renewables being the cheapest generation assets to build and operate, US utilities have lagged in deployment, owning only 15 percent of wind and 11 percent of utility-scale solar in 2019, while owning 55 percent of total generating capacity and 75 percent of remaining coal capacity.
• Tax normalization is a legal restriction that forces regulated investor-owned utilities (IOUs) to keep Investment Tax Credit (ITC) benefits for investors rather than customers. This makes utility-owned solar more expensive for ratepayers than third-party assets, leading IOUs to oppose solar development.
• Many utilities cannot effectively use the ITC and Production Tax Credit (PTC) because they lack sufficient tax liability. RMI analysis shows that in 2019, US IOUs had combined tax liabilities sufficient to build less than 4 GW of new solar and storage per year, largely due to 'bonus depreciation' provisions that created large net losses for tax purposes.
• Not-for-profit public power agencies and cooperative utilities, which serve over 25 percent of US customers, cannot use tax credits at all. They must rely on private-sector developers with higher capital costs, which reduces or eliminates the economic benefit of switching to clean energy.
• The report recommends two tax changes to accelerate the transition: eliminating tax normalization for the ITC (and allowing the PTC in its place) and providing 'direct pay' of tax credits, which would allow utilities to receive cash payments regardless of their tax capacity.

APA

RMI (2021). Simple Tax Changes Can Unleash Clean Energy Deployment. https://rmi.org/resources/simple-tax-changes-can-unleash-clean-energy-deployment/

Chicago

RMI. Simple Tax Changes Can Unleash Clean Energy Deployment. 2021. https://rmi.org/resources/simple-tax-changes-can-unleash-clean-energy-deployment/.

Wikipedia

{{cite report |author=RMI |title=Simple Tax Changes Can Unleash Clean Energy Deployment |date=17 June 2021 |url=https://rmi.org/resources/simple-tax-changes-can-unleash-clean-energy-deployment/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2021simple, author = {{RMI}}, title = {{Simple Tax Changes Can Unleash Clean Energy Deployment}}, institution = {RMI}, year = {2021}, month = jun, url = {https://rmi.org/resources/simple-tax-changes-can-unleash-clean-energy-deployment/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }