The wind power industry won a big victory in the "fiscal cliff" bill early this month: a one-year, $12-billion extension of the production tax credit. As important as the extension itself was a change in the extension’s language that allows projects that begin construction before the end of the year to collect the 2.2-cent-per-kilowatt credit for 10 years, which means incentivized wind-turbine construction will continue into 2015.
“It’s unquestionably good news for the wind [sector] and larger clean-energy sector,” says Iberdrola Renewables spokesman Paul Copleman. The language modification also allows geothermal and hydrokinetic projects to receive the production tax credit (PTC) for projects started this year.
Geothermal Energy Association Executive Director Karl Gawell estimated that new geothermal projects in as many as a dozen states could move forward this year thanks to the credit’s modification. “Congress’ action will spur significant new employment and sustain geothermal industry growth,” he said in a statement. “Consumers and utilities will benefit, as well, because developers will have greater certainty about whether the credit will be available for their project.”
But the extension gave greatest relief to the wind industry, which says half the industry’s 75,000 jobs were at risk if the extension wasn't granted. The generous extension, however, may embolden opponents of the tax credit to push the industry to go cold turkey after this latest extension.
“Wind generators continue to build in areas where new supply is not needed simply because the federal government is paying them to do so,” says Exelon spokesman Paul Elsberg. In September, the American Wind Energy Association (AWEA) dropped the nuke-heavy utility from the wind lobbying group's membership rolls because of Exelon's anti-PTC stance. “A continued buildout of subsidized wind also poses a threat now to system reliability by driving reliable, dispatchable energy sources out of the market and discouraging new investment in other clean, more reliable generation resources,” Elsberg adds.
The wind industry, however, prefers a gradual phaseout of the credit by 2019.
Even with this year’s PTC extension, however, there may not be much demand for new wind farms this year. Driven largely by the expiring PTC, developers and utilities completed construction of a record 12,000 MW of wind capacity in 2012.