Wind Power

Wind Energy Tax Credit Wins Extension

Finally, the U.S. wind power industry can get back to the business of installing wind turbines. The wind energy Production Tax Credit (PTC) — a critical factor in financing new wind power installations — will be reinstated through 2005 as part of a major tax package (H.R. 1308) extending a number of individual and business tax provisions.

The House and Senate approved the bill last week, and President Bush is expected to sign it into law. The PTC provides a 1.5 cent-per-kilowatt-hour tax credit (adjusted annually for inflation) for electricity generated with wind turbines. The PTC, which had expired December 31, 2003, will be extended retroactively from that date to December 31, 2005. “It’s a significant shift in the financial environment,” said AWEA deputy executive director Tom Gray.” We can do a good strong business with the PTC.” It wouldn’t be impossible for the wind industry to do business without a PTC, but it’s certainly a preferred scenario since all the other energy industries are given government support in a variety of forms. Feed-in tarrifs or a national Renewable Portfolio Standard would be helpful for wind and other renewables, but the PTC has so far been the most accepted and feasible government incentive. Out of the roughtly 146 billion dollar value of the tax package, Gray said the 15-month PTC extension amounts to between 1 and 1.5 billion dollars of that total amount. For that sum, it will likely generate another 2000-3000 MW of new wind power capacity. “This action by Congress and the expected signature of President Bush mean that about $3 billion in wind energy investments forecast over the next several years are now back on track across the country,” Gray said. “More importantly, hundreds of furloughed wind industry employees can now go back to work building and installing new high-tech wind turbines.” AWEA also continues to support a longer-term extension (to December 31, 2006) now included in the corporate tax/JOBS (Jumpstart Our Business Strength) bill (H.R. 4520) still pending before Congress. The JOBS bill also calls for creation of a new tax credit to encourage the use of small wind systems for homes, farms and small businesses. “We believe wind energy can provide 6 percent of U.S. electricity by the year 2020, or about as much electricity as hydropower generates today, and this action allows us to go forward toward that goal,” Gray said. AWEA said they will continue to pursue policies — such as a long-term PTC extension and a renewables portfolio standard (RPS) — that will move the wind industry beyond the boom-and-bust cycles that have resulted from short-term PTC extensions in the past. The delay in extending the PTC came following a banner year for the U.S. wind industry, in which it installed a near-record 1,687 megawatts (MW) of generating capacity-enough to serve nearly half a million average American homes. This year, a sharp drop in new installations is expected due to the absence of the incentive for nine months. Next year could be another boom year for developers, including the possibility of the the Cape Wind offshore wind farm gaining the regulatory green light for construction of their 420 MW project slated for the coast of Massachusetts. Cape Wind’s communications director, Mark Rodgers was not surprised Congress made a point to reinstate the credit. “It was only a matter of time before the production tax credit was reinstated as it enjoys broad bipartisan support for supporting the interests of the American public with cleaner air, greater energy independence and new jobs,” Rodgers said.