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Tax credit’s looming end to slow US wind industry

17 Feb 2012 19:49 GMT
Tax credit's looming end to slow US wind industry

Portland, 17 February (Argus) — Renewable energy developers predict the possible cancellation of billions of dollars of investment in wind power after Congress failed to extend the federal wind energy production tax credit.

Congress today passed legislation to extend the payroll tax cut and unemployment benefits without including an extension of the production tax credit after it expires at the end of this year. President Barack Obama is expected to sign the legislation soon.

The loss of the tax credit puts the future of wind facilities scheduled to be built in 2013 and beyond in doubt because most developers will not go ahead with projects without the subsidy.

“The stakes here could not be clearer. Economic studies have shown that congressional inaction on the PTC [production tax credit] will kill 37,000 American jobs, shutter plants and cancel billions of dollars in private investment,” said Denise Bode, chief executive of the American Wind Energy Association.

“Congress needs to understand that, with PTC uncertainty, layoffs have already begun and further job losses and even plant closings will accelerate with each month we near expiration in December,” Bode said.

The tax credit provides a $22 per MWh credit to wind producers. Given that wholesale power prices are about $35-50MWh, the credit typically represents about a third of developers' income.

Iberdrola Renewables, a large renewable energy developer based in Portland, said it is highly unlikely it would go ahead with wind projects it had planned for 2013 without the PTC.

The company recently laid off 50 workers nationwide and is de-emphasizing development of new projects because of the uncertainty. Low energy prices have also made renewable energy construction increasingly unprofitable, the company said.

Wind market participants still hope Congress will pass a bill this year to extend the credit.

“There is still time this year for Congress to extend it,” the Center for Resource Solutions, a nonprofit advocacy group, said.

When the credit's expiration has loomed in the past, new installations of renewable energy facilities have dropped 90pc, it said.

“The production tax credit makes a huge contribution to the bottom line,” the nonprofit said.

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