Production Tax Credit

New York Times story shows progress, but there is more work to be done

New York Times story shows progress, but there is more work to be done

A recent piece in the New York Times highlighted the progress that has been made to lower wind energy’s costs in tandem with performance-based incentives like the Production Tax Credit.  This progress is truly impressive, helping to spread clean wind power and create American jobs.

The American wind supply chain now includes over 500 manufacturing facilities across 43 states, and tens of thousands of jobs.  By making more and more wind turbines in the U.S., discovering how to capture the most power from the wind, wind costs have been falling.

A key part of wind energy’s success has been the renewable energy Production Tax Credit (PTC).  If the PTC is not extended, all of this progress could be lost.  When the Production Tax Credit was allowed to lapse at the end of 2012, new wind installations came to a halt. 2013 saw a 92 percent drop in new wind projects compared to 2012, with investment falling from $25 billion in 2012 to roughly $2 billion in 2013. Thirty thousand wind industry jobs were lost from 2012 to 2013 alone.

We anticipate a recurrence of this loss if the PTC is not extended through 2015 immediately. Without a PTC extension through 2015, orders for many wind turbine components will likely dry up early next year. Time is of the essence, as there can be a lag of a year or more between when the tax credit is extended and when orders for large components are placed. For those who build these components, an extension was needed months ago.

The PTC is still needed in the market to drive wind energy and correct for market failures. Especially low wind energy prices cited in the New York Times story can be found in rare locations where transmission is available to excellent resource areas, but to make that unique situation widespread we will need a lot of transmission that takes years to build.

The latest data show that in nearly all regions, the PTC is essential if new wind installations and the trajectory of cost reductions are to continue. Continuing the PTC will mean scaling up wind power, and bringing its benefits to more consumers.

That is because wind is competing in a marketplace with sources of energy that have received stable tax incentives for decades, and that often do not have to pay for the pollution they produce. Without comprehensive tax reform, it makes no sense to pull the rug out from under the wind industry while continuing permanent incentives for other sources of energy.

Wind energy creates billions of dollars in economic value by drastically reducing pollution that harms public health and the environment, but wind energy does not get paid for providing that benefit. Wind energy also protects consumers from price increases for fuel, but that is not accounted for in the highly regulated electricity market because other energy sources get to pass their fuel price increases directly on to consumers. Policies like the PTC correct for those market failures to reach a more efficient market outcome.

The tax credit has helped wind make progress – with technological advances in the wind industry helping to drive down costs. Indeed, a recent “Wind Vision” report from the Department of Energy found that with smart policies, wind power can double by 2020, double again by 2030, and then nearly double again by 2050, at no net cost to consumers.

You can help make this vision a reality by telling Congress to support the renewable energy Production Tax Credit, as hundreds of U.S. businesses have.

 

Production Tax Credit

Michael Goggin is Vice President at Grid Strategies LLC, a DC-area consulting firm working on grid and markets issues for clean energy clients including AWEA. He was previously head of Research at AWEA.

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