US wind production tax credit extended for another year

• 11 years ago (2013-01-03)
• Junior Isles

North America 1004 Renewables 757

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A one-year extension to the expiring wind industry tax credit has been included in the US fiscal cliff deal passed by the US Congress this week.

The tax credit is worth 2.2 cents per kWh of energy produced by new wind installations for their first 10 years of operation, and has been crucial in driving wind development in the US over the past two decades.

The White House also confirmed that the tax-credit extension is included in the package that the House of Representatives also passed.

Wind developers had been rushing to complete projects before the 2012 deadline, anticipating no agreement on extension, resulting in a huge boost in US wind installations toward the end of 2012.

New wind capacity installed in California during the third quarter of 2012 totalled 661 MW, compared with 921 MW installed during the whole of 2011.

The new extended credit can be claimed by any project that begins construction in 2013, even if it goes online in 2014, according to industry sources.

"Just simply, 30 per cent of the value of a project is derived from the tax credit," said Florian Zerhusen, chief executive of WKN USA. "That's what makes it so important, or you're making too low a return," Zerhusen said.

Imminent expiration of the credit has already damaged wind development across the US for 2013. Turbine manufacturers and other parts of the supply chain laid-off thousands of workers toward the end of 2012, and developers put new projects on hold, risking a further 37 000 jobs, according to the American Wind Energy Association (AWEA).

Political pressure on the credit at the national level has prompted the AWEA to propose a six-year reduction and phase-out of the credit, an idea that has drawn an unfavourable reaction from wind developers, and fiscal hawks alike. Developers view it is unfair in the face of on-going tax breaks for other forms of energy, while others want the subsidy cut-out as soon as possible.

"We've always said we won't need (the production tax credit) forever," said AWEA spokeswoman Ellen Carey. "We need to have a glide-path to keep the success."

Fritz Noble, vice president of real estate and development for Wintec Energy, predicts a wind lull in 2013. "A one-year extension just prolongs the uncertainty," he says.