Study touts ‘huge return’ on renewable energy investments
Lawmakers mull whether to extend tax credits for wind, solar and other clean environment-friendly projects
Over the last decade, state tax credits for renewable energy production have helped to create an industry in New Mexico, generating more than 11,000 jobs and $1.6 billion in economic activity, according to a new study. About 60 wind and solar facilities have been built, it says.
The study of the tax credits, which were enacted in 2003 and have cost $120 million, was released as the Legislature considers extending the credits. They are set to expire in 2018.
“Taxpayers are getting a huge return on their investments in clean energy — new jobs, new investments, new economic activity — while reaping the additional environmental benefits that come from clean energy,” said Palmer Schoening, a spokesman for Family Businesses for Affordable Energy.
The study was prepared for Family Businesses for Affordable Energy by O’Donnell Economics and Strategy, the firm of economist Kelly O’Donnell, who served in the Cabinet of former Gov. Bill Richardson. Family Businesses for Affordable Energy says it is a network of family businesses across the country supporting policies that lower energy prices for small businesses.
Under identical bills introduced in the House and Senate — House Bill 440 and Senate Bill 432 — eligibility for the tax credits for renewable energy production would be extended to 2023. Producers receive the credits over 10 years. They are available on a first-come, first-served basis to solar, wind, geothermal, biomass and other renewable energy companies.
The legislation, which has been endorsed by a number of clean energy groups, would also raise the existing caps on the amount of solar and wind energy production eligible for the tax credits. There is currently a backlog of projects on a waiting list to qualify for the credits.
The bills are among several measures introduced this session aimed at the state’s development of solar and wind power and an effort to shift the state’s heavy reliance on fossil fuels to renewable energy resources, in part to combat climate change and to diversify energy reliance to create a more stable economy.
Lance Brown, director of the Partnership for Affordable Clean Energy, said the issue isn’t about pitting fossil fuel against renewable but understanding the gains of investment. The group found New Mexico could create an additional 7,000 jobs and another billion dollars by passing the tax credit extension.
“It is important for people to look at the bigger picture because the benefits far outweigh the costs,” he said.
Alex Ayers, executive director of Family Businesses for Affordable Energy, said the group’s support of HB 440 and SB 432 is based solely on the ability of renewable energy to uniquely lower electricity costs for New Mexicans.
“We like to promote all energy,” he said. “New Mexico has great potential for solar [and wind] … whereas other states can produce natural gas very cheaply. It is all about what makes the most economic sense for those states.”
He said the timing of the study is important for informing lawmakers as they consider the bills.
“A lot of people view tax credits like this as a pure subsidy; they think it is a drain on the state coffers purely,” Ayers said. “But this shows by investing in [renewable energy], it is bringing economic activity to the state.”
The study found that for the $120 million invested in the tax credit by the state over 13 years, more than $600 million was generated in job income, a more than 5-to-1 return on investment in labor alone.
Since the tax credits were enacted, the state has gained 13 wind facilities, generating more than 1 gigawatt, and 46 solar facilities, producing 452 megawatts of energy, according to the new study, based on data from the New Mexico Energy, Minerals and Natural Resources Department and the U.S. Energy Information Administration.
Local tax revenues as a result of renewable energy development account for just under $7 million annually, the study found.
The rapid growth in clean energy is also the result of New Mexico’s renewable portfolio standard, the study says. It was signed into law in 2004 and requires all investor-owned utilities to generate 20 percent of sales through renewable energy by 2020. Rural electric cooperatives are required to generate 10 percent of sales from renewable energy sources by that time.
New Mexico produced just under 11 percent of its energy from wind power in 2016, according to the U.S. Energy Information Administration. Solar makes up 3 percent of New Mexico’s electricity use, according to the Solar Energy Industries Association.
Both the study and a fiscal impact report produced by the Legislative Finance Committee found the tax credit has created a bottleneck, with more facilities on a waiting list to qualify than those that are taking advantage of the tax credits.
Nine wind facilities are currently receiving the credit in New Mexico, and seven are on a waiting list; 18 solar facilities are receiving the credit, but 37 are waiting for the credit, including the Santa Fe Solar Energy Center and the Taos Solar Energy Facility.
Most of the planned wind energy production on the waiting list won’t become a reality without the tax credits, the Legislative Finance Committee report found.