Doesn’t look like the wind production tax credit will get another last-minute break this year, due to the larger political drama on the Hill, dominated by the budget battle. Congress, embroiled in their fascinatingly bullheaded combat, like sibling birds trying to oust each other from the nest, will likely let the credit expire.
“Unfortunately tax reform, which is where we would see something like a PTC reform, probably isn’t going to happen this year or early next year,” said Matt Stepp, senior policy analyst with the Information Technology and Innovation Foundation. “So there’s a very high possibility that the PTC will just expire and not be replaced by anything.”
The wind industry had a cliffhanger-worthy last minute renewal of the PTC at the beginning of the year. The threat of the expiring 2012 PTC, which so far has been extended on industry-jarring short term phases, was responsible for driving a record 13,131 MW of wind capacity installations in 2012, 42% of total new generating capacity – almost double the 6,819 MW installed in 2011. In a classic anticlimatic follow-on, a grand total of one wind turbine was installed in the first six months of 2013, with a scantly better 68.3 MW installed in the third quarter, according to the American Wind Energy Association (AWEA).
If the PTC, which grants 2.2¢ per kWh to wind producers, does expire at the end of 2013, effects won’t be immediately felt thanks to the change in provisions in the last renewal. Wind projects only need to commence construction, instead of service, by the end of 2013, unlike years before. Because of this, newbuilds can be expected to ramp up in 2014 through even early 2016, said Matt DePrato, analyst at IHS.
Not to say there won’t be consequences for not having a tax credit. If the PTC isn’t renewed at some point later next year, “the wind industry sales are going to go down, the deals that they’re going to make will go down because that tax incentive is absolutely crucial for them to get financing for their projects,” Stepp said. Because, you know, wind farms are expensive and developers need banks to pitch in. And banks won’t do it without the PTC.
It’s still to be seen whether reform ideas, such as the five-year phaseout of the PTC, proposed by Sen. Lisa Murkowski (R-Alaska), or the extension of the master limited partnership (MLP) to include renewables, proposed by Sen. Chris Coons (D-Delaware), will pan out.
At the end of the day, the wind industry is also complicit to a degree in their own woes, Stepp said. “Year after year they pushed for simple extensions, they never thought deeply about how the incentive can be used to make their industry better,” he said. “Only now they’re starting to think about it because their back’s up against the wall.”
- Kochs and Republicans launch bid to snuff out wind-energy tax incentives (grist.org)
- Wind Fight’s Next Round Likely To Wait Until ’14 (earthtechling.com)