Horror of horrors: Wind industry might have to deal with a lapse in their production tax credit
posted at 3:21 pm on November 5, 2013 by Erika Johnsen
All the wind industry wanted for Christmas last year was a continuation of the much-prized production tax credit on which they so heavily rely for market viability, and they finally received the only slightly belated gift of special federal treatment when Congress passed that last-minute fiscal-cliff deal in January — much to their momentary relief.
But Politico reports that, as Congress gets to work on a tax reform package that could take months to complete, it’s looking more and more likely that the PTC on which the wind industry places so much vital importance may expire at least temporarily by the end of the year:
That expiration could hurt the wind industry, which saw construction of new wind projects grind to a virtual halt this year amid uncertainty over the subsidy. The production tax credit gives wind power owners a tax credit of 2.3 cents for each kilowatt-hour of electricity they produce.
One Senate aide said tax writers in Congress aren’t even talking about a year-end extenders package, which traditionally allows for the continuation of credits like the PTC. Without an extenders package, PTC supporters must pin their hopes on reviving the tax credit as part of broader tax reform, which isn’t expected to move until next year, if at all.
(“Construction of new wind projects” ground to a “virtual halt this year amid uncertainty over the subsidy.” As in, without this gigantic subsidy in place, companies don’t even want to bother with wind projects, because sustaining a viable business model becomes too risky? …Red flag? Hello?)
“We must, as a country, get out of this unpredictable, uncertain pipeline environment,” the [American Wind Energy Association]’s CEO Tom Kiernan said Thursday.
Still, there was one silver lining to January’s one-year PTC extension. The wind industry won inclusion of language that makes it easier for companies to qualify for the tax credit. Now companies can take advantage of the tax credit as long as they start construction by Jan. 1, 2014. Previous rules required companies to have completed the project by the time the credit sunsets to qualify.
That gives the wind industry a small cushion if the PTC does expire at the end of the year, and project developers are ramping up work on several megawatts of projects to qualify under this year’s subsidy.
The start-construction language is “giving us a little more stability,” Kiernan said, but an expiration could still hurt the industry. He added that it’s “essential” that the PTC is extended by the end of 2014.
I wholeheartedly agree that we should get rid of this “unpredictable, uncertain pipeline environment,” but I would suggest that that could be better and more simply achieved by simply getting rid of the tax credit rather than continuing to cater to a bunch of rent-seeking lobbyists and doling out special treatment based on nothing more than political whimsy. As I’ve now argued many times before: If alternative-energy enthusiasts really want to encourage the innovation and price efficiencies that can help to make their preferred renewables economically viable and independently competitive, then years of heavy subsidization is not doing wind energy or anything else any long-term favors.
Breaking on Hot Air