A significant event in the environment sector took place late in 2015 – the extension of the Production Tax Credit (PTC) and Investment Tax Credit (ITC) program, which have benefited the wind and solar industries, respectively. The significance of these tax programs towards the growth of these renewable energy industries cannot be overstated. For instance, there has been a 56 percent growth for wind and solar energy over the last five years, which equates to $73 billion (with a “B”) worth of new investments and providing access to renewable energy for as many as eight million households, according to Bloomberg News. The renewable sector is now poised to become the source of the cheapest way to generate power in the U.S and beyond by the year 2020 – and experts believe that this is a critical threshold for renewable energy, as it will enable these industries to fully compete with traditional energy sources.
So what does this have to do with the water sector? In my view, it has everything to do with understanding the path forward towards greener and healthier cities. The trend towards renewable energy has many parallels with the rise of green infrastructure in the water sector. Rather than relying solely on energy generated by power plants, renewable energy seeks to locate power generation infrastructure at the site level. Similarly, initial stormwater management approaches that focused on detention-treatment-release using area- and region-wide ponds and basins are giving way to decentralized on-site green stormwater infrastructure practices that are best implemented at the micro-level scale, such as on buildings or adjacent areas as well as integrated into right-of-way corridors.
The PTC and ITC have been so successful due to the strong incentives provided by these consistent and generous tax credits for both businesses and individual households. These Federal credits are often stacked on top of state and local credits, which results in a compelling case for Clean Energy investment when reviewing the ROI for potential implementers. One of the biggest challenges in incentivizing the adoption of GSI at the site level is the relatively low fees associated with rebate programs in stormwater utility programs. Ideally, these fees would be increased to provide a mechanism that more accurately internalizes the costs associated with responsible stormwater runoff management. In lieu of this occurring, another option is the use of Federal (and other additional state and local) tax credits to help the economics of on-site retention.
Others have already considered the parallels between renewable energy and green GSI. The Center for Neighborhood Technology (CNT) proposed a “Green Infrastructure Portfolio Standard” (GIPS), which proposes an incremental increase in the amount of retrofits as a percentage of impervious addressed similar to the proposed incremental use of renewable or clean energy sources associated with Renewable Portfolio Standards (RPSs). This concept is a good one, to be sure; however, the challenge is in the driver – most RPSs are often voluntary or have limited penalties even in cases where mandates are included. Also, states may have power to require (or attempt to require) retail energy producers to comply with renewable energy goals; however, it is unclear how feasible it is for states to require municipalities to comply with a GIPS approach – unless it is spelled out in NPDES permits as such, and while targets of retrofitted impervious acres is very rare currently, this could change in the future. If it does, the GIPS approach may be more in play, but the sector seems to be heading towards incentives rather than strict command-and-control mechanisms – or perhaps a model of a forcing mechanism (permit) along with the flexibility to meet requirements through incentives on private property while municipal-led efforts address publicly-owned land for retrofits.
But back to renewable energy and its applications to green infrastructure – it is clear that the use of tax credits have been one of the most – if the THE most – critical factors in the rise in renewable energy adoption. The hurdles for both the renewable energy and GSI industries are similar – both have not been attractive at the bottom-line economic level. Providing incentives for renewable energies has helped create the long-term demand needed for these industries to find ways to reduce costs through refined technologies. GSI also suffers from an inflated cost profile, so one can project that costs can be reduced greatly in this sector as it did in the renewable energy sector. Using the PTC and ITC as models, a model could be developed for a GSI-focused Federal tax credit program – call it the Retention Tax Credit (RTC). Coupling the RTC with state/local tax credits and/or rebates and other incentives can help overcome the economics of on-site retention if we’re brave enough to fight this battle.