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Question of the Week: Is there an alternative to the PTC?

UNITED STATES: Developer RES Americas, IP consultancy Totaro and Associates and AWEA give their views on the alternatives to the on-off, currently expired US support mechanism, the Production Tax Credit (PTC).

Production tax credit: responsible for stop-start growth pattern of US wind market
Production tax credit: responsible for stop-start growth pattern of US wind market

Question: What is the alternative to the PTC?

Anna Giovinetto, vice president corporate affairs, RES Americas

In the short term, there is no alternative to the PTC. The PTC expired at the end of 2013, and it is critical that it be extended as soon as possible.

The global climate change crisis must be confronted. In the US, the electric sector accounts for about 40% of carbon emissions. After energy efficiency, land-based wind energy is the most cost-effective way to reduce carbon emissions.

Failure to extend the PTC will jeopardize thousands of megawatts of wind energy that are currently under development, resulting in a significant lost opportunity to reduce our national carbon footprint.

In the medium term, incentives for low- or carbon-free sources of electricity can provide a bridge toward a long-term policy solution that appropriately values carbon.

As we have seen from the UN Climate Summit last week in New York, a growing chorus of voices is calling for meaningful action on climate change.

The US did not singlehandedly create the global climate crisis, and we cannot singlehandedly reverse it either. But as a nation, we must demonstrate leadership in addressing the challenge, and providing solutions.

Ensuring that we have policies in place to facilitate the continued growth of carbon-free sources of electricity like wind energy is an essential component of showing leadership on this issue.

 

Philip Totaro, founder and CEO, Totaro & Associates

The US has relied on the PTC for years to help create a stable environment to foster the domestic renewables industry. With the inconsistency of the PTC extensions and the changing rules for qualification, it has made the cultivation and sustainability of a domestic supply chain difficult.

In spite of this, the cost of energy for wind has been significantly reduced in recent years thanks to technology innovation and proliferation of turbines. As we continue to see the industry head towards cost parity, it will certainly reduce the necessity for the PTC.

Unfortunately, the lack of clarity for turbine sales enabled by the PTC has meant less commitment to domestic innovation in the past two years. While some research and development (R&D) continues in the US, the majority of technology and product innovation in the wind industry has been re-centralised in western Europe with some in Asia as well.

A viable substitute for a dwindling reliance on the PTC is to increase an R&D tax credit for renewable energy. In the US wind market which continues to rebound, an R&D tax credit would foster domestic technology development as well as enable companies to repatriate the R&D investment and jobs that have been lost.

 

Jim Reilly, senior vice president for federal legislative affairs, American Wind Energy Association

Extension of the PTC and ITC this year is the highest priority, and Congress must act when they return in November or  thousands of good-paying US manufacturing jobs will be at risk and wind power's value and savings to consumers could decline.

For example, the last time Congress delayed extending the PTC, investment dropped from $25 billion in 2012 to roughly $2 billion in 2013 and thousands of manufacturing jobs were lost.

However, a year-to-year renewal of the PTC is not ideal for business decisions and by providing long-term, stable policy that appropriately values carbon-free electricity, Congress can help maximize wind's benefits to the country.

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