Federal Production Tax Credit for wind energy
America needs a secure, diverse supply of homegrown energy resources to power the nation. We also need to put more people back to work. Wind energy delivers in both of these areas with help from the federal Production Tax Credit (PTC).
The PTC keeps electricity rates low and encourages development of proven renewable energy projects. Equipped with the PTC, the wind industry has lowered the cost of wind power by more than 90 percent since 1980, provided power to the equivalent of over 15 million American homes, and fostered economic development in all 50 states.
America needs the PTC to extend beyond 2013
That’s the good news. The bad news is that the PTC is set to expire soon – at the end of 2013. Failure to extend the PTC will kill jobs and roll back progress that the nation has made to diversify its electricity portfolio.
Extending the PTC will foster economic security and energy diversity. Here’s how.
The PTC fosters economic security
With the support of the PTC, the U.S. wind energy industry has boosted the American economy:
- Over 550 U.S. manufacturing facilities across 44 states make equipment for the wind energy industry.
- Nearly 70 percent of a wind turbine’s value is produced here in America, compared to 25 percent prior to 2005.
- The price of wind power has dropped over 90 percent since 1980, benefiting utilities and electricity consumers.
- Annual private investment in wind energy is $18 billion (average over the past five years).
- Over 70% of U.S. Congressional Districts have either a wind project or wind-related manufacturing facility, bringing local economic development to the region.
Locations of the 550+ U.S. facilities that manufacture for the wind energy industry
The PTC fosters energy diversity
If wind energy is to be a part of America’s energy mix, Congress must extend the PTC. Why? Because the PTC drives energy diversity by allowing developers to secure private financing for wind projects and bring them to completion.
With the PTC’s financing support, and wind power’s free supply of fuel, wind power guarantees long-term, stable electricity prices for utilities and consumers. That’s why utilities are choosing to grow wind power in their electricity portfolios. In fact, wind provided 42 percent of all new U.S. power capacity in 2012 – more than any other energy source.
The United States generated 3.5 percent of its electricity from clean wind energy in 2012. In Iowa and South Dakota, wind now generates more than 20 percent of the states’ electricity needs. The entire United States is capable of reaching South Dakota’s level by 2030, generating 20 percent of the nation’s electricity from wind power on a national scale and providing 500,000 American jobs in wind energy.
Wind provided over 35% of all new U.S. power capacity in the last five years
PTC expiration stops growth, extension spurs growth
The PTC has been extended mostly in one- and two-year intervals since its inception in 1992, and has even been allowed to expire on several occasions. This unpredictability has made it difficult to make the industry fully cost-competitive. Now is the time to support stable, predictable policy for the wind industry by advocating for the PTC.
The difference that stable policy can make is illustrated both through technical analysis and through actual developments.
PTC in 2013: Wind projects spring back to life
Thanks to the efforts of wind industry employees and supporters who engaged Congress at every level in 2012, Congress extended the PTC (which was set to expire at the end of that year) in the American Taxpayer Relief Act. The bill was passed on Jan. 1, 2013 and signed into law on Jan. 2. The legislation includes:
- An extension of the PTC for wind projects on which construction is started prior to Jan. 1, 2014
- An extension of the Investment Tax Credit (ITC) for wind projects on which construction is started prior to Jan. 1, 2014
- An extension of bonus depreciation for wind projects that are placed in service prior to Jan. 1, 2014
IRS Guidance on qualifying for PTC or ITC
For a project to be eligible for the PTC or ITC extensions, its construction must start prior to January 1, 2014. The IRS issued a final version of the guidance on how the "start construction" provision is defined in May 2013. At the AWEA Finance & Investment Seminar in September 2013, Christopher Kelley of the U.S. Treasury Department provided further clarification and said the IRS is contemplating follow-on guidance that could be issued in September or October 2013. The key points that Mr. Kelley shared can be read here, and the full audio recording of his remarks can be heard here (AWEA members only; log-in required).
Policy extension spurs project development, creates jobs
After the PTC’s extension through 2013, business began to spring back in the wind industry from a lull caused by previous policy uncertainty. Examples include:
- First Wind CEO Paul Gaynor announced, “We are planning to substantially expand our portfolio – by as much as 50 percent or more – with several projects starting construction by the end of 2013. That will mean jobs and investment, and consumers will be getting clean energy at a competitive price.”
- Development of the Prairie Breeze Wind Energy Center in northern Nebraska, moved forward in January 2013, representing a $350 million capital investment with the potential to create 300 construction jobs.
- Expansion went forward in January 2013 for the Broken Bow Wind project near Kearney, Neb.
- The Chairman and Chief Executive of St. Louis, Mo.-based carbon fiber manufacturer Zoltek announced that the extension of the PTC would help the company keep its manufacturing momentum going in 2012. He said, “This is definitely helpful because investors were holding back on projects to see what would happen.”
Clean, affordable, homegrown American wind power is powering the U.S. economy with jobs and investment, and promoting the security and diversity of our energy supply. Now is the time to support stable, predictable policy for the wind industry by supporting the PTC.
PTC in 2012: Threat of policy expiration halted wind development
In 2012, it was uncertain whether the PTC would expire at the end of the year, or be extended. Companies throughout the wind industry were forced to put their development plans on hold, and manufacturers saw orders dry up. Examples include:
- Wind turbine blade manufacturer LM Wind Power laid off 94 full-time employees and 140 temporary employees from its Little Rock, Ark., plant in August 2012. In September, it announced further layoffs of 200 full-time manufacturing employees, 15 administrative staff, and 130 temporary workers and contractors from its Grand Forks, N.D., plant.
- Wind turbine manufacturer Siemens laid off 615 employees in Iowa, Kansas and Florida.
- Wind project developer juwi Wind closed its office in Cleveland, Ohio, and laid off the 14 staff members who worked there.
- Wind project developer Iberdrola Renewables laid off 50 U.S. employees, about half of whom were based in Oregon.
PTC study: Four-year PTC would mean 54,000 jobs
When the PTC was set to expire at the end of 2012, Navigant Consulting completed a study that demonstrated the value of stable PTC policy. The study found that a four-year PTC extension would create and save 54,000 American jobs, including growing the wind manufacturing sector by one-third. In contrast, the study found that if the PTC were allowed to expire, wind industry jobs would be cut in half, including a one-third cut to American wind manufacturing jobs and two-thirds drop in private investment in the industry.
The PTC has since been extended for just a one-year interval – through 2013. Although we haven’t seen the dramatic job growth that a four-year extension could have provided, the industry has started to bounce back since the policy was extended.