Green Energy Growth at Risk if Production Credit Expires
The construction of new hydroelectric dams, geothermal wells and biomass projects are threatened if Congress does not approve an extension of the production tax credit. Renewable energy interests provided a stark warning in a conference call on Feb. 8 as they pushed for an extension of the PTC, which is set to expire at the end of February.
"Without passage of the PTC soon or early, we will see those projects mothballed for a very long time," says Linda Church Ciocci, executive director of the National Hydropower Association. Ciocci said there are 80,000 MW of hydro projects awaiting licensing from the Federal Energy Regulatory Commission (FERC) and many of those in the pipeline will not be developed without an extension of the $22/MWh PTC.
The group sent a letter to congressional leaders pushing for an extension of the PTC through 2016, saying that the looming deadline was already leading to a decline in construction and development of projects.
"Failing to extend these tax incentives will effectively bring these projects to a grinding halt and undermine the progress our industries have made in recent years," the letter states.
Geothermal, biomass and hydro interests said that without an extension soon, they won't be able to secure project financing and their supply chain would be in jeopardy. The wind industry is also lobbying for an extension; a solar project extension through 2016 has already been approved.
Geothermal, biomass and hydro developers said Feb. 8 that their fledgling industries are even more in need of the PTC than wind, because the tax credit for their technologies has only been in place since 2005. Wind has benefited from a production credit since 1992.
PTC extension supporters hope to see it attached to a payroll tax cut extension bill that is likely to be heard before that tax cut expires.
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The PTC is important to secure financing because of long development periods. Hydro and geothermal projects said they need lead times of four to eight years, and a recent biomass project in Texas took five years to develop before the company broke ground, the group said.
Hydro Green Energy, Westmont, Ill., said without the PTC, it might have to give up some of the 13 projects it is currently trying to license with FERC and let leases lapse on some of 16 other projects in development. The lack of the PTC "hampers our ability to close financing," says Mark Stover, vice president of corporate affairs for Hydro Green. Stover said he expects only about two of the projects to make their way through the FERC licensing projects before the tax credit expires.
"If the PTC were extended this year, we would put all of our projects on a full development path, and possibly add a few more projects to our development pipeline," Stover says. "That would put Hydro Green Energy in the position to start hiring workers in engineering, construction and environmental compliance to license, build and install our projects."
If the PTC does not gain approval until later this year, the geothermal industry, which currently employs 3,000 people in drilling and construction jobs in the Intermountain West, would lose a construction season, said Karl Gawell, executive director of the Geothermal Energy Association.
"The geothermal industry has already reached its so-called tax credit cliff," he says.
Jon Weisgall, vice president of legislative and regulatory affairs for Des Moines, Iowa-based MidAmerican Energy Holdings, which develops geothermal projects, said when projects go into limbo, as they are likely to do without a PTC, geothermal developers could lose their leases for land.
"With long lead times and high up-front capital costs, there is a great need to de-risk the geothermal energy industry, and an extension of the PTC will help do just that," Weisgall says.