Wind Production Tax Credit Expires with Uncertain Impact

The controversial federal production tax credit (PTC) bestowed on new wind farms of $0.023/kWh for the first 10 years of their operation expired on Tuesday, but the impact of that policy lapse isn’t immediately clear.

Originally enacted in 1992, the federal renewable electricity PTC has been renewed and expanded numerous times—most recently by the American Recovery and Reinvestment Act of 2009 and the American Taxpayer Relief Act of 2012 in January 2013.  

Congressional extension of the tax credit last year made the significant change of removing “placed in service” deadlines and replacing them with deadlines that use the beginning of construction as a basis for determining facility eligibility. Last year, Congress extended the deadline for wind energy facilities by one year, from Dec. 31, 2012, to Dec. 31, 2013. 

According to the American Wind Energy Association (AWEA), the estimated impact of uncertainty posed by the PTC’s expiry is still being vetted. The most uncertainty will be felt by wind manufacturers, which could see orders in the pipeline dry up, the industry group noted. 

But Rob Gramlich, AWEA’s senior vice president of public policy, told POWERnews on Thursday that while the wind sector already saw a “sharp slow-down” in the first six months of 2013, utilities have been signing a record number of power purchase agreements for wind energy. “The change made to the PTC in 2013 allows projects that start construction this year to qualify for the PTC, which acknowledges the 18-24 month timeline of wind projects, and will allow companies to continue to build projects past 2013,” he noted. “We continue to see evidence that the [PTC] is an effective tool that is working.”

AWEA will continue to push for more certainty in the medium and long term, Gramlich said. “The legislative vehicle could be tax reform, an extenders package, or something else, but ultimately our industry will begin to feel the impacts of uncertainty in 2014.” 

The group, in December, lauded a proposal put forth by Senate Finance Committee Chair Max Baucus (D-Mont.) to streamline energy tax incentives so they are more predictable and technology-neutral. 

The discussion draft notes that under current law there are 42 different energy tax incentives, including more than a dozen preferences for fossil fuels, ten different incentives for renewable fuels and alternative vehicles, and six different credits for clean electricity. Of the 42 different energy incentives, 25 are temporary and expire every year or two, and the credits for clean electricity alone have been adjusted 14 times since 1978—an average of every two and a half years. “If Congress continues to extend current incentives, they will cost nearly $150 billion over 10 years,” Sen. Baucus said in a statement on Dec. 18. 

Feedback on the discussion draft is requested by Jan. 31, 2014. However, some industry observers caution that the measure could stall in Congress even though it has broad bipartisan support. 

Meanwhile, some renewable power groups have opposed the proposed reform. For the Solar Energy Industries Association, the nation’s largest solar power lobbying group, “reducing the solar Investment Tax Credit (ITC) and dramatically altering the way companies depreciate their assets could jeopardize future clean energy development in the United States.”

—Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)