Renewable Energy Projects Aim for PTC Deadline

Tax credits can keep a small business running, or a big business in the black. In the renewable energy market it is usually necessary to have a project fully functional in order to receive federal production tax credits (PTC). New York State wants to give projects in the planning and development stage a hand at qualifying tax credits before the deadline date at the end of the year in 2005.

The state’s Public Service Commission voted to accelerate a program to foster development of renewable energy generation in 2005 so that qualified generators can take advantage of federal tax credits before 2006 when the PTC may expire. Historically, the PTC, which has been crucial to helping the wind power industry compete with the entrenched and equally well-subsidized coal, oil, gas and nuclear industries, has been plagued by cycles of expiration and reinstatement. This inconsistency on the part of the federal government has stifled business growth for renewable energy businesses. The renewable energy industry has lobbied hard for a multi-year extension of the PTC which will provide a solid footing for business development and investment. Such a measure is likely to be supported by Congress, but whether that measure becomes law by 2006 is anyone’s guess. The new development schedule proposed by the commission is the first step in implementing the Commission’s September 2004 Renewable Portfolio Standard (RPS) decision, which set goals of increasing the renewable energy power generation in the state to at least 25 percent by 2013. To meet renewable target by 2013 it is estimated that New York State will need to add approximately 3,700 MW of renewable resource generation capacity. Originally the implementation of the program to support development of renewable energy projects was scheduled to begin in mid-to-late 2005 so that projects would begin to produce electricity in 2006. With that time line, many projects could miss the chance to apply for federal tax credits. “By accelerating the procurement process for renewable energy under the Commission’s RPS decision, we strive to leverage tens of millions of dollars in potential federal tax credits to benefit New Yorkers across the state,” Commission Chairman William M. Flynn stated. “While Congress might extend the credits beyond 2005, there’s no guarantee, and it would be a disservice to electricity ratepayers to miss the opportunity to maximize these benefits.” The federal tax credits hold the potential of saving electricity customers throughout the state tens of millions of dollars by reducing renewable generating costs for individual projects. New York State Energy Research and Development Authority (NYSERDA) estimates of total project cost savings, and thus customer savings, could be in the range of US $97 million, depending on the extent of renewable energy developed in 2005. Under the procurement process approved by the commission, NYSERDA will seek an initial round of bids this month or in January 2005 from companies seeking to develop renewable energy projects under the Commission’s RPS framework. Many of those bidders could qualify for the PTC, which could make their project bids lower. To qualify for the Production Tax Credit, a project must begin commercial operation on or before December 31, 2005. NYSERDA will have the final decision on whether or not to award contracts. Once operational, selected projects would receive funds made available through the RPS surcharge on utility bills. The Commission must still approve implementation plans for the full RPS initiative.
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