Uncategorized

PTC extension: Why the stakes are so much bigger this year

PTC extension: Why the stakes are so much bigger this year

AWEA Senior Technical Programs Manager John Dunlop attended the Hannover Messe trade fair in Germany last week, where the question of whether Congress will extend the federal wind energy Production Tax Credit (PTC) was a hot topic. Upon his return, John provided this analysis of why a PTC expiration will be far more damaging to far more people than in the past.

Congressional inaction was a big issue In discussions this week at Hannover Messe.  Any U.S. or foreign person who knew about U.S. politics knew about the PTC problem.  As I discussed the issue with others, it became clear that the impact will be much worse than in the early part of the last decade, when Congress failed to take timely action on three occasions and allowed the credit to temporarily expire.

New wind farm installations and jobs in the wind industry dropped by large percentages all three times, and we’re looking at another large percentage turndown in 2013.  If we see 10,000 megawatts (MW) of new wind generating capacity installed in 2012 and only squeak out 2,000 MW in 2013 (no guarantee), that would be an 80% reduction in installed value, similar to the impact of the previous inaction.

However, it's important to understand that an 80% reduction in 2013 will have a MUCH greater financial impact than an 80% reduction in 2004, the last time Congress failed to extend the PTC.

For example (very approximate numbers):

Value of installations in 2003 (1800 MW x $2 million/MW): $3.6 billion
Value of installations in 2004 (500 MW x $2 million/MW): $1 billion
NET reduction in 2004: $2.6 billion

Value of installations in 2012 (10,000 MW x $1.8 million/MW): $18 billion
Value of installations in 2013 (2,000 MW x $1.8 million/MW) $3.6 billion
NET reduction in 2013: $14.4 billion

Thus, the magnitude of the reduction in installed value compared with the previous year will likely be more than five times greater in 2013 than in 2004.

Furthermore, the impact on AMERICAN jobs will be even more dramatic.  AWEA estimates that only 25% of the $2.6 billion reduction in 2004 was of domestic content.  Therefore, the fiscal impact to U.S. jobs was arguably about one-fourth of $2.6 billion, or $650 million.

Since 2004, as has been reported here on many occasions, the U.S. wind industry has experienced dramatic growth, and the domestic supply chain for wind turbines and their components has expanded even more rapidly, so that currently about 60% of the value of new turbines is domestic. This means that the financial impact on U.S. suppliers will be 60% times $14.4 billion, or $8.64 billion, or more than 13 times the impact in 2004.

In short, the remarkable success of the Production Tax Credit in creating a new U.S. manufacturing industry with tens of thousands of new American manufacturing jobs has dramatically increased the need for serious and urgent Congressional action to provide stable tax policy for the wind power industry.

The PTC provides an income tax credit of 2.2 cents per kilowatt-hour for the first 10 years of electricity production from utility-scale turbines. It is set to expire on Dec. 31.

A House bill seeking to extend the PTC has 93 cosponsors, including 21 Republicans, while a Senate bill to extend it was introduced March 15 by seven Senators, including three Republicans.  PTC extension efforts have received the endorsement of a broad coalition of more than 370 members, including the National Association of Manufacturers, the American Farm Bureau Federation, the Edison Electric Institute, and the Western Governors’ Association. A PTC extension also has the support of the U.S. Chamber of Commerce, the National Governors Association, and the bipartisan Governors’ Wind Energy Coalition, which includes 23 Republican and Democratic Governors from across the U.S.  A PTC extension has been endorsed by a number of newspapers across the country, including the Houston Chronicle, The New York Times, the Denver Post, and the Daily Oklahoman.

Further endorsements of the wind energy production tax credit.

Related articles:

Sen. Bennet: Congress 'not doing job' on PTC extension, May 3, 2012
Veterans training co. officer: PTC extension good for vets, economy, May 2, 2012
NW policy group: PTC helps lead to clean energy future, April 30, 2012
Congressman Thompson, veterans, industry experts call for PTC extension, April 27, 2012
Layoffs in U.S. wind power accelerate as Congress fails to act on PTC extension, April 26, 2012
Submit a comment to the House Ways & Means Committee: Extend the PTC immediately!, April 25, 2012
High-tech component manufacturer calls for PTC extension, April 24, 2012
Union leader: Earth Day is also about jobs, and a PTC extension, April 23, 2012
New graphics reveal impact of impending PTC expiration on wind industry, April 20, 2012
'Think globally, act locally': News items underscore PTC and manufacturing jobs, April 19, 2012
Senator Levin visits Michigan wind component maker, urges PTC extension
, April 18, 2012
Wind power drives strong interest in U.S. renewable electricity generation
, April 17, 2012
WindTV: WINDPOWER in Atlanta, spotlighting PTC expiration risk to manufacturing growth
, April 16, 2012
AWEA Annual Market Report underscores need for PTC extension
, April 13, 2012
Iowa city prospers, hopes for PTC extension
, April 12, 2012
Denver Post editorial writer: PTC extension 'important to nation, Colorado,'
April 11, 2012

From Nevada, Michigan, Montana: Calls for PTC extension
, April 10, 2012

Sierra Club, BP agree: Extend the PTC, April 9, 2012
South Dakota newspaper joins others in endorsing PTC
, April 6, 2012
National Governors Association: Extend the PTC
, April 6, 2012
Sen. Bennet tours factories, pushing jobs and PTC extension
, April 5, 2012
WindTV Holiday Special: Church lives mission with wind power
, April 4, 2012
Montana county commissioners call for PTC extension
, April 3, 2012
'Father of PTC' explains wind incentive's value
, March 30, 2012
Citing 'all of above,' former FERC chair urges PTC extension
, March 29, 2012
Manufacturers tell Senate panel: PTC extension urgently needed
, March 28, 2012
WindTV: Colorado county gets big boost from wind power
, March 26, 2012
Former Congressman Boucher sees PTC extension likely
, March 26, 2012
WindTV: Wind power breathes new life into small Colorado town
, March 21, 2012
Citing need for certainty, BP's Landis calls for PTC extension
, March 20, 2012
In op-ed, Kansas Governor, Senator call for PTC extension
, March 19, 2012
Bipartisan group of Senators introduces bill to extend PTC
, March 16, 2012
Houston Chronicle editorial supports PTC extension
, March 15, 2012
Southern Alliance head urges: Extend the PTC
, March 14, 2012
WindTV: Missouri manufacturer grows with the wind
, March 12, 2012
Oklahoma and America need wind technicians–and a PTC extension
, March 8, 2012
WindTV: An American family, powered by a paycheck from wind
, March 5, 2012
Salazar, citing 'race we cannot cede', backs extending PTC
, March 1, 2012
Kerry, Brown win praise for bipartisan support of PTC extension
, February 29, 2012
Wichita Eagle editorial blog endorses PTC extension
, February 28, 2012
Daily Oklahoman: PTC extension “makes sense,”
February 27, 2012
Bipartisan group of Illinois Representatives supports PTC extension
, February 24, 2012
Kansas City Star backs PTC extension, praises Brownback, Moran
, February 23, 2012
Bennet visits composites factory, urges PTC extension
, February 23, 2012
Moran visits Siemens factory, pushes PTC extension
, February 22, 2012
WindTV: PTC key to wind power manufacturing jobs
, February 21, 2012
Topeka Capital-Journal: Extend the PTC
, February 21, 2012
U.S. Rep. Steve King (R-IA): PTC is jobs engine conservatives should support
, February 17, 2012
Bennet, Moran continue bipartisan push to extend PTC
, February 16, 2012
Major U.S. consumer brands like Nike on extending the PTC: Just Do It!
, February 15, 2012
Oklahoma Gov. Fallin urges conferees: Extend the PTC
, February 15, 2012
Michigan worker's plea: Extend PTC, help wind power create U.S. jobs
, February 13, 2012
Bipartisan letter from entire Iowa Congressional delegation urges: Extend the PTC
, February 10, 2012
Senate Energy Chairman Bingaman: Act now to save clean-energy jobs
, February 9, 2012
Bipartisan letter from Colorado Congressional delegation urges: Extend the PTC
, February 8, 2012
Republican governors push for PTC extension; Senators express support
, February 2, 2012
U.S. Chamber of Commerce joins broad range of groups endorsing PTC extension
, February 1, 2012
WindTV: Wind power drives commerce in small-town America
, January 24, 2012
Denver Post endorses PTC extension 'sooner rather than later'
, January 18, 2012
WSJ op-ed: 'Want Growth? Try Stable Tax Policy'
, January 5, 2012
Red State Energy, Red State Jobs
, November 29, 2011

Uncategorized

More in Uncategorized

Into the Wind provides the latest news and expert opinion from the American Wind Energy Association (AWEA).

1501 M Street, NW, Suite 900 | Washington, DC 20005

Phone: 202.383.2500 | Fax: 202.383.2505

Sitemap | Privacy | Terms of Use

Copyright 2020 American Wind Energy Association. All Rights Reserved.