PTC Not in Tax Bill

Key subsidy set to lapse

Bill Opalka | Feb 15, 2012

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Try as they might, renewable energy lobbyists were not persuasive in their attempts to get a key subsidy included in the payroll tax cut extension Congress is finalizing this week.

The production tax credit is set to expire at the end of the year, leaving project developers, utilities and component suppliers in limbo when they consider what their order books or power procurement plans will look like in 2013.

The bill before Congress is rather limited to provisions related to the tax cut, unemployment benefits extension and doctor Medicare reimbursements. Few, if any, other provisions are expected to be included.

The renewable energy industry fears a collapse of the project market in a constrained project finance market that already lacks enough supply of tax equity.

“It looks like we’re not going to succeed, despite a valiant effort, as we see the legislation dealing with these tax extenders very narrowly focused,” said Todd Foley, senior vice president for policy & government relations, American Council on Renewable Energy.

The bad news was given at the start of an ACORE webinar Wednesday.

While the tax credit of 2.2 cents per kilowatt-hour for projects put into service before year’s end doesn’t lapse until December 31, as a practical matter, projects not under construction within the next month or so will not be completed in time to qualify.

“We’ve done some market analysis and there is a cliff, especially for wind after March,” Foley said. “Our research shows there may be a 52 percent decline because of this uncertainty.”

A revival of the 1603 cash grants in lieu of the tax credit also was promoted but failed to make headway.

The fallback for the industry is the lame duck session later this year after the presidential election, though that’s too late to save project development through the remainder of this year. The American Wind Energy Association is hoping to extend the PTC this quarter, but the vehicle by which that would occur is unknown at this time.

“There is growing bipartisan support and acknowledgement that the PTC needs to be extended and there is growing interest in 1603 as people understand there is a real market problem,” Foley said, hopefully.

But 2013 is shaping up to be a different story. Vestas has already threatened to cut 1,600 manufacturing jobs next year and Iberdrola Renewables has cut staff and said it will suspend planning for next year’s installations.

Further downstream, suppliers report strong orders in the current quarter but couldn’t promise how their factories would be operating later this year or early next.

When Congress has failed to renew the credit — in 1999, 2001 and 2003 — the industry’s growth has largely stagnated. A return to those experiences is expected.

The editorial staff at RenewablesBiz.com is passionate about exchanging ideas and dedicated to promoting ongoing conversation about renewable and sustainable energy issues. We invite you to join and contribute to our online community. If you have an idea for an article or editorial contribution, please contact me via email, bopalka@energycentral.com, or phone, 860.633.0090.

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