Analysis: Phase-out of wind energy Production Tax Credit would enable U.S. industry to become fully cost-competitive

Congress asked to extend Production Tax Credit for projects starting next year

December 12, 2012

 WASHINGTON, D.C., December 12, 2012 – The American Wind Energy Association today described what a future phase-out of its primary federal incentive could look like, saying "we're already showing we're a leader in innovation. Now we're showing we're a leader in addressing the country's fiscal issues."

Denise Bode, AWEA's CEO, stressed that, "At the same time, our number one priority right now is not putting the wind industry over its own fiscal cliff. 

"Congress must extend the wind energy Production Tax Credit for projects that start next year, to save an entire U.S. manufacturing sector and 37,000 jobs that we'll otherwise lose by early 2013. Specifically we urge Congress to extend the wind tax credit for all projects that commence construction in 2013, as adopted by the Senate Finance Committee on Aug. 2, on a bipartisan 19-5 vote."

The Production Tax Credit (PTC), a policy with long-standing bi-partisan support, has succeeded in incentivizing an average of $15.5 billion a year in private investment in U.S. wind farms over the past five years. It works by providing a tax credit of 2.2 cents a kilowatt-hour once the electricity is generated, for the first 10 years that a U.S. wind farm is in operation.

Led by Members of Congress who worked to help build a domestic wind industry, to the benefit of local economies and energy customers, the PTC has become an American manufacturing and innovation success story.

The result of AWEA's analysis specifies that the tax credit would start at 100% of the current 2.2 cents a kilowatt-hour for projects started in 2013, and be phased down to 90% of that value for projects placed in service in 2014; 80% in 2015; 70% in 2016; and 60% in both 2017 and 2018, ending after that.

Bode said the analysis indicates that would allow wind energy to establish a stable base market in the U.S. that the industry can build on, with further market and technology innovation. The process of developing it started last spring, included detailed economic analyses and high-level discussions with industry leaders, and culminated in approval by the AWEA Board of Directors.

"We began this process in order to be a part of the solution on our nation's fiscal challenges, while creating needed stability for wind industry development, both of which are concerns for our industry. We wanted to take this head-on, as part of our patriotic duty as well as our duty to the industry." Bode said. "We completed the analysis, and this is what it identified as necessary for at least a minimally viable industry."

The resulting proposal is described in a letter that AWEA is sending to leaders on Capitol Hill today. It is addressed to Sen. Max Baucus (D-MT), Chairman of the Senate Finance Committee; Sen. Orrin Hatch (R-UT), ranking Republican on that committee; Rep. Dave Camp (R-MI), Chairman of the House Ways and Means Committee; and Rep. Sander Levin (D-MI), ranking Democrat on that committee. Copied are House Speaker John Boehner (R-OH) and Minority Leader Nancy Pelosi D-CA); and Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY). 

The letter says in part, "The wind industry recognizes that our country is facing significant fiscal challenges and is supportive of all energy technology incentives being reviewed and even phased down when Congress considers tax reform. However, the PTC has supported the wind industry in its efforts to significantly reduce the cost of producing electricity, and its continued availability for a reasonable period of time will allow the industry to invest in the cost-saving technologies required to finish the job."

Bode said that the letter addresses separate parallel conversations that have been going on between the industry and Capitol Hill, about extending the PTC in the short term, and the vision for the long-term future of the PTC.

"With the policy certainty that accompanies a stable extension," the letter says, "the industry believes it can achieve the greater economies of scale and technology improvements that it needs to become cost-competitive without the PTC."

AWEA is the national trade association of the U.S. wind energy industry. We represent 1,000 member companies and over 100,000 jobs in the U.S. economy, serving as a powerful voice for how wind works for America. Members include global leaders in wind power and energy development, turbine manufacturing, and component and service suppliers. They gather each year at the Western Hemisphere’s largest wind power trade show, the AWEA WINDPOWER Conference & Exhibition, next in Chicago, Illinois, May 7-10, 2018. Find information about wind energy on the AWEA website. Gain insight into industry issues on AWEA's blog, Into the Wind. And please join us on Facebook, and follow @AWEA on Twitter.