Wind industry performing their traditional pre-tax credit expiration scramble
posted at 1:01 pm on December 26, 2013 by Erika Johnsen
As I mentioned last week, a handful of Senate Democrats are once again pushing for the annual revival of the all-important production tax credit on which the wind industry so thoroughly relies to stay in business, but it looks like the credit is indeed going to expire for the time being. Don’t get too excited, though; that doesn’t mean that the PTC is gone for good, as the credit has been allowed to expire temporarily before being renewed at a later date several times over throughout its more than two-decade life cycle.
Last year, Congress threw in the extension of the PTC as a last-minute inclusion to the fiscal-cliff deal, but with a slight twist on the credit’s usual provisions: Normally, a wind project would need to be in commercial operation by the time the provision expires in order to qualify for its lavish benefits, but as of the last extension, a wind project need only have begun construction in order to qualify. That means the wind industry has a little more cushion afforded to them, and they’re taking full advantage of it by getting a bunch of projects going just in the nick of time, via the NYT:
Developers are signing deals, ordering equipment and lurching ahead with construction starts to qualify for a tax credit that is worth 2.3 cents a kilowatt-hour for the first 10 years of production. This month, giant turbine-makers like Vestas and Siemens have announced major new orders, including a deal worth more than $1 billion with MidAmerican Energy, an Iowa-based utility majority-owned by Warren E. Buffett’s Berkshire Hathaway, and another with the Cape Wind project in Nantucket Sound. …
“What we see right now is a race to the finish line, where we’re trying to get projects signed,” said Mark Albenze, chief executive of the Wind Power Americas unit of Siemens Energy. “It’s a little bit of a different dynamic, whereas in ’12 our projects teams were the ones stressing out in December and now it’s our acquisition team.” …
However, executives said, developers are unlikely to start any projects without a credit in place because they cannot compete with power generation from other sources like cheap natural gas. And with prospects for a redesign of the whole tax code looking dim at the moment, clean-energy advocates are calling for yet another extension of the subsidy.
Referring to the credit, Kevin A. Lynch, managing director of external affairs at Iberdrola Renewables, which develops and operates green energy projects, said: “In the near term, projects that do not have the P.T.C. attached to them are probably difficult to justify economically for buyers to purchase, and therefore for us to build.”
“Difficult to justify economically.” You don’t say.