Wind, Geothermal, Biofuels Get One-Year Reprieve In Fiscal Cliff Deal
As you know, Congress went down to the wire on the "fiscal cliff" decision, and as part of the deal, clean energy got a one-year extension of the production tax credit, that applies to wind, geothermal and biofuels projects.
Also extended are the Investment Tax Credits used for community and offshore wind projects.
In an important departure from how the PTC previously worked, all projects that start construction in 2013 will receive the credits. Previously, they had to be online by the deadline, which would make it much harder to qualify. Wind projects, for example, take 12-18 months to be completed.
Allowing projects access to the PTC when they begin construction will greatly benefit geothermal and biomass projects, considered more risky by investors. The Geothermal Energy Association expects it to result in $4 billion in investments.
Since the credit is only for one more year, jockeying for another extension will have begin again soon. Rep. Issa (R-CA) says he has the PTC in his sights for increased scrutiny next time around, calling it a prime example of "government's excessive and wasteful spending."
For 2013 at least, the PTC extension is expected to save up to 37,000 jobs and revive business at nearly 500 manufacturing plants across the country.
How much it will revive the industry, however, isn't clear. By the time Congress acted, industry contraction was well along and many cancelled projects will remain dead in the water.
Before the extension was passed, Paul Copleman, communications manager for Iberdrola Renewables (the second biggest developer of US wind projects) told BBC News:
"Even if the tax credit is extended, our new construction plans likely will be ramped back substantially in 2013 compared with the last few years. So much time has passed without certainty that a normal one-year extension would not be a game-changer for our 2013 build plans."
The subsidy pays $0.02 cents per kilowatt-hour produced over 10 years. That works out to about $1 million for each large turbine, or about 30% of its overall cost.
The industry must still push for a long-term policy that doesn't create a cycle of uncertainty at the end of each year. Each time that the wind PTC has been allowed to expire in the past, it has resulted in a collapse in new construction.
As part of their last ditch effort to get the extension, the American Wind Energy Association offered a path to phase the PTC out over six years. At the time the industry would be able to operate without subsidies.
Wind set a record for new installations in 2012, accounting for 44% of all new electrical generating capacity in America, according to the U.S. Energy Information Administration. Without the PTC, that wouldn't have happened.
There is now about 50 gigawatts of wind energy on the US grid (enough for 13 million homes), compared with just 1.5 GW when the credit was originally introduced by the first Bush administration.
Wind energy workers have been living under threat of the PTC's expiration for over a year and layoffs had already begun, as companies idled factories because of a lack of orders for 2013.
Projects were cancelled and the industry was in for a major contraction.
Nearly 70% of the wind turbines (and components) installed in the US are now made here, growing from just 30 factories in 2004 to 472 in recent years.
The US Department of Energy projects that wind energy can supply 20% of US electricity by 2030, which would support 500,000 high quality jobs.
While the PTC is critical to create a level playing field for renewable energy (with cheap, subsidized fossil fuels), it was renewed as part of a "tax extenders" package that gives corporate welfare to a variety of industries.
The fossil fuel industries retained their tax advantages in the deal, amounting to $46 billion over the next 10 years. The wind PTC would cost $18 billion if it remained in place during that time.
Among other corporate handouts included in the bill are $9 billion for off-shore financing loopholes, $1.6 billion for Goldman Sachs, and tax breaks for Hollywood, computer and pharmaceutical companies.
Subsides were also extended for: people that build racetracks $43 million for two years); private railroads for maintaining tracks ($165 million a year); incentives for mining companies to buy safety equipment and train employees on safety; and others. Read about them: