Perspective

Congress should not impose a federal renewable portfolio standard (RPS).

Since 1978, the federal government has relied on tax incentives to promote the generation of electric power from renewable resources-"green" power from hydroelectric facilities and windmills, solar panels and photovoltaic cells, facilities that burn biomass, municipal waste and landfill gas, and geothermal and ocean thermal resources.

For several years, however, the U.S. Congress has looked into promoting green power through a federal Renewable Portfolio Standard (RPS)-an alternative to tax incentives. An RPS-in effect a quota on green power-would require that a specified percentage of electric power sold by electric utilities be derived from renewable resources.

Should Congress include a green-power quota in any comprehensive energy bill?

Federal Tax Incentives

A federal RPS would supplement or perhaps even replace the use of tax incentives for green-power development. Four incentives are available under the Internal Revenue Code for investments in power generation from renewable resources.

First enacted for a four-year period in 1978, a business energy tax credit now authorizes a tax credit of 10 percent on the cost of equipment purchased and installed for power generation from solar panels or geothermal resources. The tax credit is available for equipment that complies with U.S. Department of Energy performance standards. In 1992, the tax credit became a permanent feature of the code. This incentive, however, is not available to electric utilities.