Simple Tax Changes Can Unleash Clean Energy Deployment

The report identifies tax regulations as a primary barrier preventing US utilities from adopting low-cost renewable energy. It highlights how 'tax normalization' and the lack of tax liability for non-profit or loss-carrying utilities create 'perverse incentives' that favor fossil fuels. To meet President Biden's goal of 100 percent clean electricity by 2035, the author proposes eliminating tax normalization for the Investment Tax Credit (ITC) and introducing 'direct pay' mechanisms to ensure all utility types can access clean energy incentives.

• Despite renewables being the cheapest generation assets to build and operate, US utilities have lagged in deployment; in 2019, regulated investor-owned utilities (IOUs), public power agencies, and cooperatives owned 55 percent of total generating capacity and 75 percent of remaining coal capacity, but only 15 percent of wind and 11 percent of utility-scale solar.
• The legal restriction of 'tax normalization' forces regulated IOUs to keep Investment Tax Credit (ITC) benefits for investors rather than customers, making utility-owned solar more expensive for ratepayers and less competitive than third-party assets.
• Many utilities cannot utilize the ITC and Production Tax Credit (PTC) because they lack sufficient tax liability. Public power agencies and cooperatives are not-for-profit and pay no taxes, while many for-profit IOUs use 'bonus depreciation' to offset taxable earnings. RMI analysis indicates that in 2019, US IOUs had combined tax liabilities sufficient to build less than 4 GW of new solar and storage per year.
• The document proposes two specific tax changes to accelerate the transition to 100 percent clean electricity by 2035: eliminating tax normalization for the ITC (and allowing the PTC as an alternative) 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} }