Federal incentives are merely one of the many drivers that affect the US renewable electricity market. Other factors that affect US renewables deployment include state renewable electricity requirements, electricity demand growth, infrastructure replacement needs, and natural gas prices. Nevertheless, given the abundance of relatively cheap natural gas and only modest projections for electricity demand growth, federal financial and deployment incentives for renewable sources of energy will necessarily play a significant role in maintaining the viability of renewable power in the US. In 2012, renewables produced 12% of total US electricity generation, mostly from hydro, wind, and solar. However, the availability of new tax credits and incentives has spurred a gradual transition away from wind and solar power. Some of these federal financial incentives include production tax credits (PTCs) and investment tax credits (ITCs); PTCs are a tax credit for every kilowatt-hour generated for the first ten years, and ITCs are based off eligible capital costs for a renewable project. Depending on capacity factor and capital costs, a project will generally derive greater value from one type of tax credit over another. At present, different options are being proposed with regards to the future of renewable electricity tax credits—while the Obama administration would like the PTC to become permanent and refundable, temporary extensions and various phase out alternatives have also been considered. In addition to tax credits, loan guarantees and EPA existing source guidelines are other federal-level measures intended to increase the deployment of renewables in the US. In the future, a federal clean energy standard and proposals for master limited partnerships for renewable projects may further bolster the pace of domestic renewables deployment.
