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United States

A subsidy instead of a tax credit

The sudden dearth of companies in the United States looking to invest in financial vehicles that reduce their tax burdens (main story) has sparked talk of the need to fundamentally change the nature of the $0.021/kWh production tax credit (PTC) that drives the US market for wind power generation. Some are arguing that the PTC should not be a tax reduction instrument, but a straight subsidy per kilowatt hour of electricity produced, paid directly to project owners.

"I know just through attorneys and contacts that some of our faithful senators and politicians in Washington have been considering paying projects directly the tax credit," says Joel Link from Invenergy, a major independent wind project developer in Chicago. "In their view, when it's revenue that was offset and never received versus direct payments made, what's the difference when it's budgeted?"

Link says the political effort to turn the PTC into a subsidy stands only a minor chance of being implemented if lawmakers return to Washington for a so-called lame duck post-election session. Even so, wind power lobbyists on Capitol Hill are preparing for action. The direct payment option is only one of the possibilities being discussed. Another idea gaining interest is being referred to as "refundability" of the tax credit, with the PTC being awarded to projects but then traded back to the federal government at a discount, such as 85% of its value.

"The government is saying, well it would have cost us something anyway, but this will cost us less," says one lobbyist. "I don't think anyone has settled on one idea yet. People are discussing what might work or could work, and then you've got to run that through the screen of Capitol Hill and what is actually politically possible."

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