Wind Sector's Future Cloudy As Federal Tax Credit Expires
Once again, uncertainty reigns over whether the federal production tax credit (PTC), which expired on Dec. 31 for wind and several other alternative energy industries, will be renewed.
The credit, which has a long history of being temporarily renewed after expiration, pays 2.3¢ per kilowatt hour of generation to wind, geothermal and cloosed-loop biomass energy companies, and 1.1¢/kWh to municipal solid-waste and certain other alternative power firms. The payment period generally applies to the first 10 years of operation. If Congress does not renew the PTC, say those who stand to benefit from it, the future of new projects and investment in these technologies is in jeopardy.
"Despite experiencing a sharp slow-down in the first six months of 2013, the wind industry has picked up steam. Utilities have been signing a record number of power purchase agreements for wind energy, manufacturers have been re-hiring, and many projects have begun construction," says Rob Gramlich, senior vice president of public policy at trade group American Wind Energy Association (AWEA), Washington.
The PTC, which was renewed in January 2013 and modified to allow projects to qualify that began construction that year, is an effective tool, he says. The modification allows firms to continue building projects already under way.
AWEA is focusing on the tax reform process, given that extending the PTC "isn't likely to move" while Washington lawmakers continue discussions on comprehensive tax reform, Gramlich says. "But if tax reform does not pass in this Congress, we should not prematurely sunset clean-energy tax credits since that would destroy investors' expectations for many projects currently being planned and destabilize already fragile markets."
Critics contend the PTC should be abolished. "How long do you give an 'emerging market'? [Because the wind industry] has been doing this for decades," says Thomas J. Pyle, president of the non-profits American Energy Alliance, a lobbying group, and the Institute for Energy Research, which conducts research in the oil, gas, coal and electricity markets. Pyle says renewal of the 2013 PTC will cost taxpayers $12 billion over 10 years. "If an industry is not efficient or affordable, we shouldn't support it through credits," Pyle says. He adds that nearly 30 states have renewable-energy mandates, "so they have a guaranteed market share."