November 22, 2011 | by Justin Wheating | Business Policy, Energy Policy, Sustainability + Energy

Earlier this month, I was fortunate enough to attend the AWEA Fall Symposium. This year it was held in southern California at a lovely hotel. To any casual observer, it appeared to be a normal corporate networking conference.

Underneath this rosy exterior however, there was lots of turmoil as decision makers and influencers agonized over the current state of the wind industry and what to do about the looming expiration of the production tax credit (PTC). The term “falling off a cliff” was used repeatedly in regard to the US market after 2012.

Wind Industry Boom and Bust Cycle; courtesy of AWEA

Boom and Bust Cycle; courtesy of AWEA

 

The legacy of boom and bust


The boom and bust cycle is not new to the wind industry. While the gas and oil industries are able to secure subsidies that last over many years, the production tax credit expires every few years. In fact, it is the normal modus operandi. The difference now is that the industry is no longer a small backwater. There are over 400 factories building equipment for wind power and 75,000 jobs dependent on these firms. People’s livelihoods are at stake – resting upon unreliable federal policy and an ineffective Congress.

The good news is that the industry has moved dramatically in the last four years to wean itself off this dependence through remarkable steps in innovation and development. The result? There’s been a 30% reduction of wind farm capital costs, and the percentage of domestic content has risen from 25% to 60%.  A four-year extension of the PTC would allow business to plan appropriately to build on this success and become the most competitive source of new power.

But isn’t the PTC just another hand-out?


Absolutely not.

It’s a revenue generator for local businesses, communities, states and the U.S. Treasury. It is a tax credit granted based on the amount of energy produced by the wind farm. In order to get to the stage of applying for a tax credit, a developer must have already committed capital to the project. Turbines will have already been manufactured and installed and dozens of businesses will have supported this work – from restaurateurs to lawyers.

Plus, at the stage the government grants the tax credit, it will have already collected payroll taxes, filling fees, real estate taxes, sales taxes and income taxes resulting from the construction and pre-construction work of the wind farm. Without the PTC, none of this would have come to be. And the government still gets to collect all of the taxes for the remaining life of the wind farm.

Now that sounds like a pretty good deal.

justin wheating
Justin Wheating

As a self-proclaimed financial chap and president of NRG, Justin has a passion for numbers. He writes about financial trends in the wind industry, the marriage of innovation and finance, strategic partnerships, and musings about American business culture from the vantage point of a British national.

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