PTC — and the U.S. wind industry — still in limbo

In the U.S., the wind energy industry remains in turmoil about its prospects because the U.S. Congress has not yet authorized an extension beyond 2012 of the production tax credit (PTC) for wind energy.

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In the U.S., the wind energy industry remains in turmoil about its prospects because the U.S. Congress has not yet authorized an extension beyond 2012 of the production tax credit (PTC) for wind energy. The wind industry’s demand for glass and carbon fiber, polyester and epoxy resin and core materials required to make the massive blade structures for turbine rotors has become a composites industry staple, worldwide, but in the U.S. it is not a stable market for many composite material suppliers. With the PTC firmly in place for the past three years, the composites industry has found in wind energy a windfall, having captured a significant piece of a reported $15 billion in annual private investment funds. In April of this year, however, wind energy news outlets were inundated with reports of slashed profit estimates, pre-emptive layoffs, construction postponements and the like as Congress stalled decisive action on the PTC.

The American Wind Energy Assn. (AWEA, Washington, D.C.) has led a wide-ranging campaign, joined by many others, to encourage not just an extension, but another multiyear extension. The PTC was last extended through Dec. 31, 2012, by the American Recovery and Reinvestment Act (ARRA) of 2009, more commonly known as the Obama stimulus package. Wind industry growth since that extension — significantly greater than in previous years when wind proponents had to make do with yearly PTC extensions, often in the 11th hour — has become the wind industry’s best argument for a multiyear commitment. Figures recorded by the AWEA indicate that the wind industry’s average annual growth rate from 2009-2011 was 35 percent.

Two bills are currently under consideration. The word from Washington is that representatives from both political parties expressed support for some form of extension at an April 26 House Ways and Means subcommittee hearing. However, the subcommittee, charged with considering reform of the U.S. tax code, is known to be considering a “phase down” of the PTC as part of any extension approval. At CT press time, however, President Obama strongly urged the U.S. Congress to extend the PTC as well as the Section 48C clean energy investment tax credit (ITC) as part of comprehensive bipartisan economic development initiative. Wind project developers can choose to receive the 30 percent investment tax credit instead of the PTC. For projects placed in service before 2013, and when construction for the project began before the end of 2011, developers can claim the ITC as a cash payment from the Department of the Treasury. A different federal incentive, the small wind investment tax credit, is available through Dec. 31, 2016, for smaller turbines used to power individual homes or businesses.

Under federal law, the PTC provides an income tax credit of 2.2 cents per kilowatt hour for the first 10 years of electricity production from utility-scale turbines. This incentive was created under the Energy Policy Act of 1992. A recent AWEA study predicts that if the PTC is allowed to expire on Dec. 31, 2012, as many as 37,000 jobs could be lost.