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United States

Jubilant welcome of tax credit extension

The federal Production Tax Credit (PTC) has been extended to the end of 2001. Under a $385 billion compromise budget bill passed on Capitol Hill on November 25, the PTC extension was also made retroactive to June 30. That is the date when eligibility for the tax break, approximately $0.017/kWh for the first ten years of a project's life, had expired. The two and a half year extension is a major victory for the wind industry.

Wind in America has received a huge boost. The federal Production Tax Credit (PTC) has been extended to the end of 2001. Under a $385 billion compromise budget bill passed on Capitol Hill on November 25, the PTC extension was also made retroactive to June 30. That is the date when eligibility for the tax break, approximately $0.017/kWh for the first ten years of a project's life, had expired.

The two and a half year extension is a major victory for the wind industry. The tax credit can be worth as much as $30,000 a year in savings for one wind turbine. Indeed the credit's looming expiration prompted the largest rush of wind development in recent times. Some 800 MW was installed in the months leading up to June 30 to qualify for the credit (Windpower Monthly, June 1999). Since then development has all but ground to a halt.

The extension has been the legislative priority of the American Wind Energy Association (AWEA) since 1997. "Two years ago, AWEA set a course to obtain extension of the PTC," says the association's legislative director Jaime Steve. "While we have had to tack a bit here and there, we stayed the course with confidence and determination and have reached our destination." President Clinton was expected to sign the budget bill, with the PTC extension, into law before the Thanksgiving Holiday on November 25.

"We are pretty pleased," says Ken Karas of Enron Wind Corp, the largest US manufacturer of wind turbines and also one of the leading wind plant developers on the American market. "It makes a big difference." Karas says that without the PTC extension there would be almost no significant wind development in the next two years in the US, except for what is legislatively mandated such as in Minnesota and Texas.

In contrast Karas now predicts that America, with an extended PTC, will see anything from 500-1000 MW of new wind development by the end of 2001, mostly in the Upper Midwest, the Dakotas, Texas and Wyoming. That is a huge addition to the current base. By the end of 1999, AWEA estimates that US installed capacity of wind will have exceeded 2500 MW, with some 900 MW of new or repowered capacity installed this year alone.

The tax credit, says Karas, is needed in the interim, until wind achieves cost parity with other generating technologies, or until the real value of renewables is built into its cost, with a carbon tax or some other recognition of fossil fuel's externalities, or with a federal renewables portfolio standard.

The fight for the extension had been especially fierce this legislative year. A five year extension had been introduced into the House of Representatives with the support of 135 congressmen and women. A similar bill in the Senate had 35 co-sponsors. And a five year extension of the credit was also included in President Clinton's budget proposal for fiscal year 2000. In recent weeks, support for the shorter, 30-month PTC extension came from nearly half of the entire membership of the House of Representatives, or 192 sponsors, and 26 member of the Senate.

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