The Production Tax Credit, a 2.2 cent per kilowatt hour credit for new wind energy projects, was recently extended for a year as part of the American Taxpayer Relief Act of 2012, which passed the Senate and the House on January 1, 2013. Though the ink is still drying from the President’s signature, there’s no wasting any time discussing what this means for the wind industry in the future.
The key modification for the one year extension of the Production Tax Credit is the bill changed the definition of an eligible project, so that a wind project now only needs to commence construction before the end of 2013 rather than being fully placed in service. This effectively makes the PTC, and the Investment Tax Credit (ITC) for offshore wind, an 18-24 month extension. Still, this is a short-term solution.
While there is no guarantee that this extension will reverse the devastating furloughs and layoffs right away, it’s a step in the right direction.
The inclusion of the language that allows for projects to just commence construction rather than get their project up and running was vital to keep the promising wind manufacturing industry growing and to hopefully bring back the workers we lost in the short-term.
It is vital that Congress passes a long-term extension of the PTC and ITC, and develops a comprehensive energy policy that lays out a clear, long-term path forward to foster both short and long-term investments in renewable energy.
The PTC for wind energy has played a significant role in the development of an American industry that employs thousands of workers. When the credit is consistently available for a period of several years, the industry sees considerable growth. However, when the credit is allowed to expire, the industry declines and workers are laid off.
According to DomesticEnergy.com the report “…states that over the next three years, at the current rate of expansion, power generation from wind energy would double, and with that growth would come increased environmental and public health benefits. Should this come to fruition, wind energy would then prevent as much global warming pollution as taking an additional 11 million cars off the road, and save enough water to supply an additional 600,000 people.”
The Investment Tax Credit (ITC) is a vital component to the development of a wealth of untapped, domestic offshore wind energy resources. Offshore wind has the potential to play a significant role in diversifying America’s energy portfolio.
The ITC works to help finance these projects by allowing offshore wind facilities to receive a 30 percent of capital expenditures investment tax credit in lieu of the Production Tax Credit, for any size offshore wind project. As projects along our coasts begin to secure financing and pass regulatory standards, the expiration of the ITC for offshore wind would have crippled the momentum of an industry posed to create good-paying American jobs and clean, renewable energy.