Policy & MarketMore
US wind industry could accept six-year PTC phase down - AWEA
The US wind industry believes a phase down of the production tax credit over six years through 2018 would enable it to become cost competitive without the main federal subsidy, which was enacted in 1992.
In a letter to eight leaders in both parties in Congress, American Wind Energy Association chief executive Denise Bode says the industry’s own analysis shows that such a glide path would enable it to sustain minimal viability, while continuing to achieve cost reductions.
She writes that the “extensive analytical effort” indicates that such a phase down could be a PTC starting at 2.2 cents per kWh, or 100% of the current level for projects that begin construction in 2013, followed by 90%, 80%, 70%, 60%, and then 60% of the current level for projects placed in service from 2014 through 2018.
“In coordination with any phase down of the credit, we would urge Congress to consider additional policy mechanisms to encourage a diverse portfolio that includes renewable energy,” she writes.
Bodes notes while Congress “should be proud” for having supported the PTC, “the stop-start nature of short-term extensions has made it difficult to get the industry to a place where it can be fully cost-competitive.”
Policy certainty is the only way the industry will be able to make long-term investment decisions, she adds.
The letter is the first time AWEA has laid out a possible timetable for elimination of the PTC, which some members of Congress and many wind energy supporters believe must be part of future legislation if the industry hopes to win an extension beyond 2013.
It is unclear if Congress will act on the PTC in the so-called “lame duck” session that began after national elections last month and is scheduled to continue through next week. Given the ongoing uncertainty, developers have halted most projects, causing a sharp downturn in wind equipment orders and resulting in thousands of workers being laid off.
AWEA, with roughly 2,000 member companies, has struggled this year to balance competing interests with the PTC to formulate a forward-looking industry agenda. While members want a PTC extension, they lack consensus for how long, or if and when it should sunset.
Critics of wind energy including fossil fuel interests claim what the industry really wants is to be subsidized indefinitely, and have been pressuring Congress to allow the PTC to expire this month. Fiscal Republican conservatives, meanwhile, contend the country can’t continue to underpin wind when it faces record budget deficits.
In her letter, Bode says the industry recognizes that the country faces “significant fiscal challenges” and supports that all energy technology incentives being reviewed, or even phased down when Congress considers tax reform.
The PTC generally enjoys bipartisan support in the Great Plains and Midwestern states with the best wind resource and where much of industry’s manufacturing base is located. But lawmakers there have lost political clout in Congress the past several years, as evidenced by the ongoing struggle to get a farm subsidy bill through the House of Representatives. The prior one expired in September.