Future Uncertain for Wind PTC Despite Committee Vote

Editor’s Note: EarthTechling is proud to repost this article courtesy of Offshore Wind Wire. Author credit goes to Todd Griset.

A handful of U.S. offshore wind projects could benefit from a proposed extension of federal tax incentives approved by a Senate committee last week.  If enacted into law, the bill endorsed by the U.S. Senate Committee on Finance could give a boost to projects capable of beginning construction before the end of 2013.  This could widen these projects’ lead over other projects on the drawing board.

In a bipartisan 19-5 vote on August 2, the Senate Finance Committee approved the Family and Business Tax Cut Certainty Act.  Overall, this bill would extend more than $205 billion in tax cuts across fields from personal income tax to energy-related businesses.  The largest tax cut extension would increase the amount of personal income exempt from the Alternative Minimum Tax for two years; this AMT relief is projected to cost $132.2 billion.

wind power

image via Shutterstock

The bill also includes a $17.5 billion package of energy-related tax credits and incentives.  Of these, the largest segment relates to extensions and modifications of incentives for the production of renewable electricity and the development of renewable power projects.  Under Section 45 of the Internal Revenue Code, taxpayers can claim a credit for every kilowatt-hour they produce from eligible facilities placed in service before a statutory deadline.  For onshore and offshore wind projects, this production tax credit (PTC) amounts to 2.2 cents per kWh, and lasts for up to a decade.  Current law requires wind projects to be placed in service by the end of 2012 to qualify for the PTC.

The bill endorsed by the Senate committee would extend the wind PTC through 2013.  More helpfully, the bill would shift the threshold for qualifying for the credit from being placed-in-service to beginning construction.  This is especially significant for projects with a long construction timeline as is typical for offshore wind: developers could qualify for the incentive by commencing construction activity before the end of 2013, even if the projects do not begin producing power until a later date.  (Despite locking in their eligibility by beginning construction before 2013, a project owner will only be able to claim the production tax credit once the project begins producing power.)  The Senate committee estimates that this extension of the PTC will have a net of cost $12.1 billion over ten years, depending on how many eligible projects begin construction before the end of 2013, and on how much power such projects ultimately produce over the next decade.

The bill also extends the investment tax credit, or ITC, available in lieu of the PTC.  Current law allows developers of certain renewable electricity generation facilities to take an investment tax credit in the year that the facility is placed-in-service.  The ITC is equal to 30% of the developer’s eligible investment in the facilities.

  • trueblueredstater

    If you think that the fossil-fuel-owned US House of Representatives is going to stand still for something that is good for the competition to their corporate sponsors, you just haven’t been paying attention.