America’s economic strength over the last century has been fueled in large part by access to affordable and abundant domestic energy resources. Investments in oil, hydro, nuclear and natural gas have unlocked innovations that have helped ensure America’s energy security. Energy, particularly the global transition to next generation forms of energy, remains one of the largest growth opportunities that exists today. This transition is critical to our ongoing competitiveness and venture capital plays a critical role in all of it through the funding and support of high-growth startups focused on unlocking new energy resources.
As a nation, we depend heavily on access to stable, low-cost energy sources to fuel economic growth and ensure national security. We are fortunate to have a strong, diverse natural resource base. However, much of our competitive advantage over the last two centuries has come from our ability to innovate—to develop new, lower-cost or advantaged technologies such as oil, nuclear, natural gas, and now renewables, ahead of our competitors.
Key to energy innovation is the U.S. tax code. The tax code that exists today is an outdated patchwork of technology-specific credits that largely benefit incumbent technologies and does not encourage innovation, either by the entrenched technologies or by the emerging technologies that are trying to get a foothold in the starting gate. One of the biggest inconsistencies in the current tax code is that almost all of the conventional energy credits are permanent and targeted at increasing supply from mature technologies, while credits for renewables are temporary. This has a profound effect on where equity investors, corporations, and lenders are willing to invest their money.
NVCA is committed to advancing policies that help spur the growth and development of young energy companies that are on the cutting edge of innovation in the energy sector. Most recently, NVCA has been working with lawmakers in Congress on the creation of a new
Energy Innovation and Manufacturing Tax Credit that would streamline the energy tax code toward a singular, long-term policy that provides consistent, durable incentives for new technology across the entire energy industry.
Specifically, the tax credit would move away from the current practice of the government picking long-term technology winners; refocus federal support on early technology deployment where it is needed most; and encourage private investment in energy innovation and discovery. The credit seeks to achieve technology neutrality and applies to any innovative technology used for the production of fuels, energy generation property, or any technology that can be paired with energy generation property to improve energy efficiency. The credit would be transferable up- and downstream in a company’s supply chain via business relationships to allow pre-revenue and emerging growth technology companies to obtain its full value.
In addition to helping young startup companies unlock new energy resources, the credit would deliver real value to the overall economy through increased job creation due to the fact that eligible companies must be operating qualifying facilities in the United States that manufacture or produce an eligible technology.