This article identifies the need to transform the federal tax credit system towards renewable energy development. The mismatch between the profitability requirements of tax credits and the revenue profile of renewable energy projects renders them ineffective. For this reason, tax credits provide only partial relief against renewable energy project payback periods that require ten years or more to recover their up-front capital expenditures. Against this background, this article explores alternative options for federal tax policy to more cost-effectively promote renewable energy deployment than under the current regime of tax credits.
Type of publication: