Production Tax Credit for Wind Energy Expires; Projects under Construction Remain Eligible
Congress allowed the production tax credit (PTC) for wind energy to expire on January 1, 2014. However, projects under construction at the end of 2013 may still qualify for the PTC. Therefore, we expect a significant number of new wind projects to come online in 2014 and 2015.
- Congress provided a one-year extension of the PTC in the American Taxpayer Relief Act of 2012 (i.e., fiscal cliff bill) on January 2, 2013
- An important change to the PTC was the removal of the “placed in service” eligibility requirement; instead projects are eligible for the PTC if they started construction before January 1, 2014
- IRS guidance on the topic allows projects to meet the eligibility requirement if they have performed “physical work of a significant nature” or incurred 5% of total project costs by January 1, 2014
- Additional IRS guidance allows projects operational by December 31, 2015 to meet “continuous program of construction” requirements; projects becoming operational in 2016 or beyond will be considered on a case-by-case basis
- The current value of the PTC is 2.3¢/kWh for the first 10 years of operations
Since more than 5,100 MW of wind capacity was under construction as the PTC expired on January 1 (Source: SNL), the change in eligibility requirements assures a pipeline of projects coming online over the next two years. Consequently, the industry is likely to experience a long glide down moving forward. This contrasts the precipitous decline in installations experienced in 2013 following a record 13.2 GW installed in 2012. Without the painful cliff of prior years, this may take pressure off lawmakers to renew the PTC each year as they have in the past.
Additional details on the PTC: http://www.dsireusa.org/incentives/incentive.cfm?Incentive_Code=US13F&re=1&ee=1
This report is part of the Clean Tech & Sustainability Minute series. To view all featured Minutes, please click here.View More
Welcome to ScottMadden!
Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.