In Bid for Immediate Extension, AWEA Proposes Gradual Phase-Out of Wind PTC

The American Wind Energy Association (AWEA), an industry trade group that has forcefully been lobbying for an extension of the production tax credit (PTC) that is set to expire on Dec. 31, on Wednesday asked congressional lawmakers to instead consider a future phase-out of its primary federal incentive. The group said that even if temporary, an extension of the performance-based market mechanism was critical "to allow the industry to invest in the cost-saving technologies required to finish the job."

The PTC is essentially a tax credit of 2.2 cents/kWh that is applicable to power generated from wind farms for the first 10 years from the start of operations. In its letter on Wednesday, AWEA urged lawmakers to adopt a policy that would extend 100% of the tax credit for projects started in 2013, but just 90% for those placed into service in 2014. Projects starting operations in 2015 would see an 80% extension, 70% in 2016, and 60% in both 2017 and 2018. The PTC would end after that. The phase-out plan would sustain a "minimally viable industry, able to continue achieving cost reductions," AWEA said.

"The wind industry recognizes that our country is facing significant fiscal challenges and is supportive of all energy technology incentives being reviewed and even phased down when Congress considers tax reform," wrote AWEA CEO Denise Bode in the letter. "However, the PTC has supported the wind industry in its efforts to significantly reduce the cost of producing electricity, and its continued availability for a reasonable period of time will allow the industry to invest in the cost-saving technologies required to finish the job."

Bode cited a Navigant Consulting study, which suggests that without a PTC extension, 37,000 wind industry jobs would be lost by the end of the first quarter of 2013. Already, "most project plans for 2013 have been shelved, triggering layoffs for developers, manufacturers, and the entire supply chain," Bode noted. "If the wind industry’s domestic supply chain is lost now, it will take years to build it back up to its current level."

The letter is addressed to Sen. Max Baucus (D-Mont.), Chairman of the Senate Finance Committee; Sen. Orrin Hatch (R-Utah), ranking Republican on that committee; Rep. Dave Camp (R-Mich.), Chairman of the House Ways and Means Committee; and Rep. Sander Levin (D-Mich.), ranking Democrat on that committee. Copied are House Speaker John Boehner (R-Ohio) and Minority Leader Nancy Pelosi D-Calif.); and Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.).

The lame-duck Congress is currently preoccupied with avoiding the so-called fiscal cliff, but AWEA claims talks are occurring to extend the PTC in private. A fiscal cliff proposal issued by the White House, for example, includes extension of the PTC along with other business tax credits, though it was rejected by House Speaker John Boehner. If an agreement does not occur before the possible Dec. 24 adjournment, lawmakers are likely to return to session to vote on a final agreement during the last week of December. AWEA has said it anticipates the PTC will be extended as part of the fiscal cliff package.

Sources: POWERnews, AWEA

—Sonal Patel, Senior Writer (@POWERmagazine)