The $0.023/kWh federal production tax credit (PTC) and 30% investment tax credit (ITC) are set to expire at the end of 2013. But rather than kicking the industry into crisis mode, as looming expiries have in the past, developers and manufacturers find themselves with a little breathing room.
When Congress last extended the credits a year ago, it changed the rules to allow projects to qualify for support as long as construction started before the end of 2013. Previously, projects had to be up and running by the deadline in order to receive the credits.
"Unlike years past, the industry is not really facing a drop-dead end-of-year date," said Matt DaPrato, senior research analyst at IHS Emerging Energy Research (IHS EER).
By early December, ISH EER was tracking 6.5-7GW of capacity with power purchase agreements, most of which was scheduled to be built out in 2014 and 2015. DaPrato expected that number to rise before the end of the year. "We think there is going to be some more, whether it be from more utilities jumping in or from merchant hedge opportunities, which we are seeing grow in Texas in particular."
Still, DaPrato expects it will not be long before industry concern starts to build. "I think that next year, as OEMs are starting to ship turbines out into the field and looking at their order book beyond 2015, is when we'll see more push for policy certainty."
Disruption
Any prolonged disruption in policy support would have a significant impact on the sector, as it did in 2012, when uncertainty over whether or not the PTC would continue led developers to pull back on project development. Even though the credit was extended at the last-minute, just one wind turbine was installed in the first six months of 2013. The figure crept up in the third quarter, but only to 68.3MW. There was about 1GW of projects in a position to come online by the end of 2013, says DaPrato, a far cry from the 13GW the US installed in 2012.
That kind of slowdown is something the sector does not want to see repeated. The American Wind Energy Association (AWEA) is looking for action to extend the PTC sooner rather than later. "This cannot drag out for too long or else disruptions will occur again," said Rob Gramlich, senior vice-president of public policy at AWEA.
Normally, Congress deals with the PTC and other expiring tax provisions through a so-called year-end extenders package. But that was set aside in 2013 while the Senate and House worked on a broader corporate tax reform package. As the year waned, however, that effort appeared to be losing steam.
"Most lobbyists in Washington think corporate tax reform is very unlikely," says Keith Martin, a partner at law firm Chadbourne & Parke. Once that reality starts to sink in, he says, Congress will likely turn its attention to expiring tax credits.
"When an extenders bill starts to move, it will be a heavy lift for the wind industry to be part of it. There is more organised opposition to extending the production tax credit at this time than in any previous battle."
While the Senate is likely to support extending the PTC again, the House of Representatives is just as likely to take the opposite view. That makes it a subject of negotiation between the two sides and the outcome of that will be is hard to predict.
