President Donald Trump late Sunday signed the massive spending package into law that included extensions to federal tax credits for solar and onshore wind, and offers an unexpectedly big boost to offshore wind.

The legislation also instructs the Department of the Interior (DoI) to promote the development of 25GW of solar, wind and geothermal generation capacity on public lands by 2025, and accelerate permitting of projects there. Congress also made available more than $2bn over the next five years in wind and solar R&D funding at the Department of Energy (DoE).

Analysts said the measures will bring relief to developers battling Covid delays, offer welcome new visibility to investors – and bode well for the big climate and green energy agenda promised by incoming President Joe Biden, who takes office 20 January.

The $900bn Covid relief bill alongside $1.4trn of federal spending measures, had passed by wide margins - 359-53 in the House and 92-6 in the Senate.

As it stands, the bill includes a one-year renewal to the key wind production tax credit (PTC) at 60% of full value ($25/MWh) for onshore wind output.

Projects will now have until the end of 2021 to start construction and must enter full service within four years to qualify for the PTC. They are also eligible for an 18% investment tax credit (ITC) on capital expenditure (capex) in the year of commercial start-up.

Lawmakers did not retroactively raise the 40% PTC value for projects that began construction in 2019 to 60% of the full rate as is the case for 2018 and 2020 projects and now those in 2021. Some sponsors were able to defer scheduled construction start for projects last year to 2020 to capture the higher PTC benefit.

Private consultancies are forecasting US onshore wind installations this year to exceed the 13.3GW national record in 2012. The latest renewal ensures the booming US wind market will surge to unprecedented levels through Biden's initial four-year term.

Offshore wind did far better than the industry dared to hope, with a 30% ITC now in place for any project on which construction begins between 1 January 2017 through the end of 2025. The change is retroactive.

The ITC for offshore wind expired in 2019. Last December, Congress enabled sponsors to qualify projects at 18% ITC if they began construction this year in lieu of the 60% PTC. This provided little help to the industry since the slow-rolling federal permitting process has meant that most projects would be unlikely to complete construction within four years to qualify.

According to law firm Norton Rose Fulbright, the US Treasury is considering whether to extend the construction completion deadline for ITC eligibility to seven or 10 years, something Biden's administration is likely to enact.

Today's ITC extension does not give projects the option to instead claim the PTC if they begin construction after 2021. Historically, offshore projects have sought to qualify for the ITC given their complexity and lead times involved in financing, permitting and procurement that are longer than for those onshore.

There are now at least 10 offshore projects in the federal permitting process queue. The 800MW Vineyard Wind I, which hopes to be the nation's first large array, recently suffered another setback in its three year effort to obtain a green light for construction. Atlantic states have made about 29GW in offshore wind capacity procurement commitments through 2035.

The roughly $3bn project off the southern coast of Massachusetts had sought to qualify for 18% ITC worth $540m versus $900m with 30% ITC.

Solar projects received a two-year ITC extension at the present 26% through 2022. After then, the credit will step down to 22% if they begin construction in 2023. They must enter commercial operation by 31 December 2025. Any non-residential projects online after then will be eligible for 10% ITC.

The American Clean Power Association (ACPA), recently formed with the American Wind Energy Association and other entities, said: “We appreciate that Congress has recognised clean energy’s significant contributions to our nation’s economy and role in providing jobs and investments during the recovery from the Covid-19 pandemic.

“We also applaud Congress for recognizing the enormous potential of offshore wind, America’s largest untapped electricity source, as a brand-new provider of jobs for American workers and clean power for American families.”

The American Council on Renewable Energy (ACORE) said the package would help US clean energy workers who have been hit by layoffs amid Covid-related disruption and cancellations.

“Extending the solar and wind tax incentives and making the investment tax credit available for offshore wind projects is a bipartisan vote of support for the renewable industry and the hundreds of thousands of Americans building our clean energy future,” said ACORE CEO Gregory Wetstone.

“These policies will help get people back to work, accelerating our economic recovery and achieving greenhouse gas emissions reductions that scientists tell us are necessary to protect our climate.”

Transition

Happy Christmas for US wind and solar as Congress unwraps tax credits boost