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United States

Tax credit a net benefit to treasury

Tax revenues from wind farms in the United States more than offset the cost of the $0.021/kWh production tax credit (PTC) granted to project owners, says GE Energy, which released the results of a study last month estimating that wind farms built in 2007 have a net present value benefit to the US Treasury of $250 million.

"Congress is debating how to pay for the wind tax credits, perhaps without realising that, over time, wind farms pump more money into the US Treasury and state and local coffers than they take out," says Kevin Walsh, head of renewable energy for GE Energy Financial Services.

The analysis found that the 5244 MW of wind projects installed last year will generate $1.9 billion in taxes on project income, $540 million in taxes from individual workers, $280 million in taxes on the profits of equipment suppliers and $30 million of income tax on lease payments and royalties to landowners for a total net present value contribution to federal coffers of $2.75 billion. The total cost of the PTC for the projects is $2.5 billion.

Those figures, according to Walsh, do not take into account the environmental benefits from pollution savings or the state and local tax income that wind power provides. The study estimates the projects will generate an estimated $6 million a year in local property taxes, as well $15 million annually in state income taxes on wages and profits during construction and $1.5 million per year in taxes while operating.

In 2007, wind projects created about 17,200 construction jobs and another 1600 jobs for 20 or more years of operation, reports GE. The wind generation will also benefit the country economically by avoiding the production of ten million metric tons of CO2 emissions a year.

The study was undertaken, according to Walsh, in the hope of breaking a deadlock in Congress that has seen several failed attempts to extend the PTC, which expires at the end of the year. The crux of the problem is disagreement over how the cost of the incentive will be offset in other parts of the US budget. GE wanted to send a message that wind power incentives are not just a drain on the treasury. "We said let's look at this for what it is. It is a long term asset that generates long term benefits," Walsh comments. "We are hoping this will help bring the parties closer together."

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