Wind Power Tax Credit Dies but Industry Booms

Brian Hicks

Written By Brian Hicks

Posted January 3, 2014

As we rang in the New Year and the clock struck midnight on Tuesday, gone was 2013 and the wind Production Tax Credit (PTC).Wind Subsidy Dies While Industry Booms

The PTC, which rewards wind producers for creating wind energy, was heavily opposed by conservatives in Congress. The generous tax credit that has helped generate wind power for more than 20 years didn’t reach the tax credit extension like it had in years past.

This latest act comes nearly a year after its last reprieve. Opposition called the tax credit little more than a taxpayer handout.

Despite under-performing, Congress has repeatedly acted to extend the PTC before this week, usually by one to two years at a time, since its inception in 1992. Most recently, it was amended as part of the American Taxpayer Relief Act of 2012, in January of this year.

While this marks a small victory for conservatives, it’s not time to give up on wind just yet.

The wind PTC generated $25 billion in private investment in 2012, according to Tulsa World, and supported upwards of 80,000 jobs. The tax incentive gave wind producers a 2.3-cent federal tax credit for each kilowatt-hour generated and used for as long as 10 years.

Conservative Victory

Every dog has its day, and for the first day of the New Year, that day belonged to the Republicans. After all, the wind industry has shown little success after 20 years of preferential treatment; perhaps it was time for a little wake up call.

The wind industry can now show its moxie without federal backing.

Data shows that the PTC did very little for most states. According to The Daily Caller, more money was going to the federal government to support wind subsidies than to the actual wind producers. Eleven states and the District of Columbia paid into the tax credit, but had no wind production of their own and reaped no benefit from the federal subsidy.

The wind PTC is expected to cost $7.7 billion from 2013 to 2017, while other estimates have costs reaching as high as $9.7 billion.

Yes, it’s a small victory for the conservatives; it’s also not the first time the PTC has not been extended. It has happened a few times in the past, and it always saw legislation bring it back.

This time things are a bit different. Conservatives argue that it makes no economic sense to keep giving free money to an industry that hasn’t performed.

Bigger Than Ever

So, why then is wind bigger than ever as we begin 2014?

That’s because it is performing. The entire wind sector saw a huge decline in the first six months of 2013, but since, has charged right back, seeing a record number of utilities signing on for wind energy. And since the PTC’s extension last January, that extension allows projects that start construction this year to still qualify for the PTC, according to Power; projects that typically take 18-24 months to develop. This is the evidence that the PTC is, in fact, working.

As long as developers put a 5 percent deposit down on a project started in 2013, according to mySA, they will have until 2015 to still make a claim on the PTC credit over the following 10 years.

Oklahoma made 1,500 megawatts of wind project announcements in 2013, and utility deals with Arkansas, Texas and Nebraska, according to Tulsa World. They now sit at sixth place in the nation for wind power.

Siemens (NYSE: SI) just announced a 448 wind turbine deal for 5 projects in Iowa from MidAmerican Energy (OTCMKTS: MDPWK), according to Business Insider. It is set to be the largest wind turbine order EVER, and will compete with natural gas, and show that wind can profit without subsidies.

Facebook (NASDAQ: FB) is in on the action, too. They announced in May to build a $300 million data center in Iowa that will be powered by wind, according to Business Insider. This endeavor could grow to $1 billion by the end of the decade.

Needless to say, those fighting for the PTC and for wind power aren’t overly worried about having no extension for the New Year. Later this month, lawmakers could still come to some sort of an agreement to provide a tax credit. It’s important to note that tax reforms have not been finalized.

Maybe the wind industry can stand on its own without all the fuss. It seems to be doing quite well today.

Take Away

What we need to remember is that incentives have been given to American-made energy for more than a century in order to keep energy affordable. Wind has proven that it can work – cleanly and efficiently – and it will only become a stronger part of the U.S. energy mix.

The PTC is available for all aspects of renewable energy, but has been most prominent with the wind industry, and that’s why projects have taken off heading into the New Year, because the PTC is the driving incentive that the industry needs.

The topic will surely be raised as Congress talks taxes in the coming weeks, and if clean energy is to be a staple for the U.S. energy mix, further incentives are going to be made.

They’re off the table today, but those credits could be right back tomorrow. Either way, wind is only getting stronger. 

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