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8/1/2012 | 1 MINUTE READ

The PTC: Symptom of policy uncertainty

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The U.S. federal Production Tax Credit (PTC) is set to expire on Dec. 31, 2012, because Congress claims it cannot afford the yearly cost (estimated at $3.5 billion). Here's why Congress is wrong and who's really behind opposition to the PTC.

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The U.S. federal Production Tax Credit (PTC) was introduced in the 1992 Energy Policy Act to stimulate wind energy development and has been renewed many times, most recently in 2009. It is described by Jigar Shah in “The Maturing of Wind Energy” on Energy.aol.com as providing investors “with a tax credit equivalent to 2.2 cents per kilowatt-hour (kWh) produced — or roughly 20 to 30 percent of the cost of a wind farm.” However, the PTC is now set to expire on Dec. 31, 2012, because the U.S. Congress claims it cannot afford the yearly cost (estimated at $3.5 billion USD). Shah notes that Congress never mentions oil, gas and coal subsidies that are slated to exceed $110 billion over the next decade. Oil and gas development, which has been subsidized since it began, has never faced expiration of its financial incentives, but its lobby is powerful and well financed. According to a report by the nonpartisan Center for Responsive Politics, oil and gas companies outspent environmental groups $175 million to $24 million to defeat a recent greenhouse gas emissions bill, with ExxonMobil alone contributing $27.4 million.

Shah believes the wind industry does not need the PTC, “but only if we first get rid of far greater amounts of taxpayer support for the more mature oil, gas and coal sectors.” A Chicago-Ill.-based Goldwind USA spokesperson told CT recently, “We don't need to rely on a PTC — we just want to know what the parameters of the market will be. Many in the wind industry favor a two- to four-year phaseout of the PTC.” Goldwind contends that the current policy uncertainty produces a roller coaster market with dramatic ups and downs that creates chaos, tears apart supply chains and thwarts technology development.

A recent report by consulting services firm Navigant (Boulder, Colo.) finds that PTC expiration would produce a nearly 50 percent decrease in the number of wind energy jobs. The American Wind Energy Assn. (Washington, D.C.)  estimates that during the past five years of bipartisan PTC policy stability, wind power has brought $20 billion of private investment into the American economy each year. Over that same time period, 183 oil and gas companies have contributed $680 million to Congressional campaigns.

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