Hardly a day goes by without a new announcement for the development of a new large utility scale wind farm or solar project. From a huge solar project in Arizona to a recently announced first of it's kind offshore wind farm off the coast of Delaware. Tens of thousands of megawatts of new renewable capacity is in the pipeline in various stages of development, but it could all come to a screeching halt. More below the fold.
In 1992 the federal government created the Production Tax Credit (PTC) as part of the Energy Policy Act of 1992. The PTC provides a 2 cents/kilo-watt hour credit for electricity produced from qualifying renewable facilities - wind, solar, geothermal - for the first ten years of production. While it doesn't seem like much, this credit is quite often the difference between a project being economic and it not being economic.
The PTC is set to expire at the end of the year and has not been extended. The affect of not extending the PTC is already having implications, as investors are extremely hesitant to investin something that is uncertain. The PTC has been allowed to lapse three times in the past and every time renewable capacity has suffered tremendously, as this chart from the American Wind Energy Association shows:
And anecdotally several companies have said that they will not continue their projects should the PTC not be extended. For example, the Spanish engineering firm Abengoa, which is planning the largest concentrated solar power plant in the country 70 miles southwest of Phoenix, has said the plant won't be built if the tax credits expire. Pretty much every large scale renewable solar and wind project has a provision that if the PTC is not extended the project can be cancelled.
So why hasn't it been extended? Politics, of course. House Democrats, seeking to abide by "pay-as-you-go" budget rules, insist that the tax credits must be paid for by raising revenue elsewhere. But Senate Republicans have balked at every proposal so far to find that money. Democrats figured to pay for the credit by delaying a tax break for companies with foreign operations and closing a tax loophole for hedge fund managers. This is the thrid attempt to pass the bill, previous attempts have tried to fund the credit by diverting subsidies from oil and gas companies to green projects. President Bush has threatened to veto the bill shold it be resurrected with similar funding provisions.
The cost of the Credit to extend it one year: $7 billion.
A GE study concluded that the revenues lost from the credit are more than made up for in taxes collected.
Extending the PTC just one year would help tremendously, ideally it should be extended five years, the more certainty in the credit the more willing developers are to commit and the sooner we can continue trying to green our electric generation protfolio.