Buried in the fiscal cliff deal resolved on New Year’s Day was a one-year extension of the renewable energy production tax credit. While this outcome is a victory for clean energy sectors like wind and biomass, the extension falls short of a long-term solution ASBC and allies like the American Wind Energy Association were pushing for. In 2009, Congress extended the wind production tax credit until 2012. The production tax credit amounts to 2.2 cents per kilowatt hour generated for 10 years.
The revised credit applies to projects started in 2013 but it will remain in effect for two years so that developers will have time to finish them. The PTC will spur investment in these clean energy technologies and will help the United States remain competitive in the global clean technology marketplace, creating jobs and moving toward a clean energy economy.
Looking ahead, there is movement in Congress for a gradual six-year phase-out of the PTC. One plan being pushed would reduce the amount of the credit by 10 percent a year until it would stop altogether in 2018.
The Production Tax Credit allows for an income tax credit of 2.2 cents per kilowatt hour for the production of electricity from wind. That in turn incentivizes and rewards the production of this renewable energy source. With the PTC in place, the wind industry could create as many as 54,000 jobs in the United States, including 46,000 manufacturing jobs. The recent extension of the PTC is important because it will help foster a strong domestic turbine manufacturing industry, create high-wage jobs, lower energy costs, and strengthen domestic manufacturing, in addition to helping the United States become more energy-independent.
The Investment Tax Credit (ITC) is a lot like the PTC. It equals 30% of the cost of investment for small wind projects using turbines that create 100kW or less. Since the ITC is for small wind projects, the determining factor between using the PTC or ITC depends on the capital requirements compared to the amount of kWs produced. The ITC gives investors a strong incentive to fund small wind energy projects, as they can claim this tax credit as an offset to their federal income tax liability in the first year the project is placed in service.
Extending the credits enables the wind industry to make longer-term investments needed to keep wind power growing in the United States. Such projects could generate 20% of America’s electricity needs through clean energy, while creating 500,000 jobs by the year 2030. The wind industry currently provides over 75,000 jobs, including manufacturing jobs at over 500 facilities nationwide.