With all the rhetoric about governing for all Americans, sometimes politics is just about picking winners and losers.
Take the ongoing soap opera of who in the energy sector is likely to gain or lose benefits from the current congressional tax plan.
While retaining at least $15 billion in tax subsidies for fossil fuel producers (coal, crude oil, natural gas), the House of Representatives plan would slash support for both renewables and the electric car industry.
The primary moves criticized by both the renewable community and environmentalists are the proposed changes to the renewable electricity production tax credit (PTC).
This credit provides benefits to generation of wind, solar, geothermal, and other types of renewable energy.
Now, the PTC is already scheduled to be phased out in three years (by 2020).
Both wind and solar energy producers have been factoring this into forward guidance as more cost savings are introduced into the renewable sector.
But the House tax plan would accelerate the cut by more than a third. An analysis just completed by an industry player concludes the proposed change could reduce the credit's value by up to 45%.
The renewables industry is quick to point out that the PTC has created hundreds of thousands of jobs nationwide, spawned significant ancillary economic investment, and resulted in the United States becoming a major center for wind and solar power development.
But apparently that's not enough, and it's now on the chopping block – as far as the House is concerned.
The Senate, however, may be planning something else.
Here's who the winners and losers will be…
Wind Power Took the Largest Hit – for Now
As the House's tax plan was revealed, the market's reaction centered on one power source in particular – wind.
On Nov. 9, Vestas Wind Systems AS (OTCMKTS: VWDRY) declined 16.4%. The entire reason was a reduced guidance from the company based entirely on the proposed House acceleration of the PTC removal.
If there was any doubt about what markets in general, and renewable energy investors in particular, hate most, it was evident in last Thursday's overreaction…
The proposed change to the wind energy tax credit doesn't have to become law for it to negatively impact the industry.
It's enough that investors are unsure if the credit will remain, and they move their money elsewhere. This type of financial uncertainty has long plagued the wind industry, as Congress has been required to renew the credit every few years.
But wind providers are hardly alone among the renewables feeling the pinch.
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.