What could stimulus mean for energy businesses?

The Choose Energy Team
By The Choose Energy Team
For business

(July 17 2020)

A renewable energy stimulus may help struggling energy businesses.

The U.S. renewable industry employs over 10 million people and conducts over a trillion dollars of economic activity each year – especially in the Lone Star State. However, this industry has recently been hit hard by the coronavirus, leading to widespread bankruptcy. A renewable energy stimulus could help many energy businesses.

COVID-19 and social distancing orders have forced many energy businesses to pause their operations until normal life resumes. In this time, energy businesses are still required to pay the overhead costs for their business without their workforce to drive production.

Many businesses do not have the balance sheet required to survive several more months without increased revenue. Businesses and local governments are looking towards state and federal aid to help business stay afloat for the next several months.

Why does Congress need to help energy businesses?

Businesses in the energy industry, especially clean energy, are growing increasingly vital within the American economy. Energy businesses are going through a rough time with the advent of COVID-19 and the downturn of the economy. This has led many energy employers to lay off a significant portion of their workforce. These businesses are in dire need of a stimulus from the government as they near the verge of bankruptcy.

If energy businesses go bankrupt, the economy will suffer many consequences. Energy business are some of the main driving forces behind increased energy efficiency, global energy independence and decreasing pollution in the environment. A stimulus from the government would act as a buffer to companies until the economy returns, ensuring the state of energy businesses will remain the same or improve after the economy recovers. The federal government still hasn’t passed the renewable energy stimulus, but ongoing pressure from senators and local governments may give it a final push towards approval.

What exactly does the stimulus provide for businesses?

Tax credits

One of the most mentioned aspects of the stimulus is the different types of tax credits that will be available for energy businesses. Some of the tax credits include investment tax credits (ITC) for solar power, production tax credit (PTC) for wind power and some temporary tax conversions for refunds.

This may not seem like much for a stimulus, but the cumulative effect of these tax credits can be enormous. Tax credits are designed to reduce the amount of money a business owes to federal and state governments. Instead of using that money to pay the government, businesses can use this to pay for their expenses. The savings provided by the tax credits can be substantial depending on the size of a business.

Funding for projects

The stimulus can also provide much needed funding to continue renewable energy projects. Since COVID-19 started, many major energy companies have ceased virtually all projects for the remainder of 2020. This directly impacts the contractors, local governments and energy businesses that would gain from the economic activity.

The stimulus from the government would give energy businesses the confidence to start projects immediately and get Americans back to work. With projects commencing, thousands of Americans and American businesses will return to work. The majority of states and cities have lifted stay-at-home orders, so this stimulus could be a step towards resuming operations for energy businesses.

 

Dhoof Mohamed writes about energy and IT topics for various clients. His academic interests include solar energy initiatives and the future of sustainable energy. His articles have appeared on SiteProNews, ChooseFlorida and the office of the U.S. Embassy. You can reach him at dhoof@dhoofmohamed.com.

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