Fiscal Cliff Deal Restores Wind Energy Tax Credit, at Least for a Year

Wind energy production tax credit extended one year as part of fiscal cliff dealAll the political debate, industry lobbying, public relations campaigns and wind industry hand-wringing concerning extension of the federal wind energy production tax credit (PTC) appears at an end with Congress agreeing to extend wind energy tax credits for another year as part of a last-minute deal to avoid the U.S. going over the so-called “fiscal cliff.”

Enacted and allowed to expire at least three times since the 1990s, which wind power market analysts say has resulted in a cycle of recurring boom-and-bust in the US wind energy market over the past two decades.

The Congressional accord announced Tuesday, January 1 would only extend the PTC through 2013, raising the specter of another round of intense debate, lobbying and public relations in the near future, if the current round subsides at all.

Last Minute Deal Too Little, Too Late?

The American Wind Energy Association (AWEA) applauded the last-minute deal, which President Obama has been reported as saying he will sign into law. Extending the wind energy tax credits will save some 37,000 “green” jobs and resuscitate business for the 500 wind power manufacturing plants that have been built around the US, as well as across the extensive wind energy supply chain and beyond, according the AWEA.

US wind power project developers have been rushing to start construction on projects this year before the tax credits’ expiration, and a flurry of project sales and purchases has taken place as some participants seek to lighten their debt loads and restructure their capital while others shop for deals.

Coming as it has at the last minute, US wind energy industry layoffs have already been enacted and wind power plants idled or closed, effects the AWEA says will carry over and aren’t easily reversed, according to a GigaOm report.

Offering wind power owners a tax credit of 2.2 cents per kilowatt-hour of wind-generated electrical power for 10 years or a payment of 30 percent of construction cost, the PTC has been the catalyst of a boom in US wind power in recent years. New wind power installations accounted for 44 percent of total installed electricity generation capacity in the US in 2012, says GigaOm’s report, citing US Energy Information Administration (EIA) data.

Iowa has been one of the US states realizing the cross-cutting benefits of rapid growth in US wind power. Some 20 percent of the electricity produced in Iowa, ~5,100 kWh, comes from wind energy, and some 7,000 Iowans are employed in the wind energy sector, the Des Moines Register reports.

Iowa ranks behind only Texas and California in installed wind power capacity. “Overall, this is very, very good news for the wind industry and I think it will help us out,” the Register quoted Harold Prior, executive director of the Iowa Wind Energy Association. He added that the Senate’s provisions are basically a two-year extension because work on projects begun this year can be completed in 2014.

Prior also pointed out the damage that’s already been done as a result of the accord being struck at the last minute, and the risk that lies ahead given the extension is a short-lived one.

“So while it is good news on one side, it is almost too short to do a really long-term good,” the Des Moines Register quoted Prior.

“But the industry needs more certainty than a one- or two-year extension. Pretty much 2013’s developments are lost right now because of the lead time needed to manufacture the major components. Also, the manufacturers of major components need a better surety of what the government subsidies are going to be before they invest millions in manufacturing these large components.

So we need to take this as a really positive step and thank the Senate for doing this, and hope the House approves this, then move forward to try to get a long-term extension.”

Image credit: all_pk, courtesy flickr

Andrew Burger
Andrew Burger
A product of the New York City public school system, Andrew Burger went on to study geology at the University of Colorado, Boulder, work in the wholesale money and capital markets for a major Japanese bank and earn an MBA in finance.

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