United States

United States

US Industry must reset development cycles

UNITED STATES: US wind energy companies will have to ramp up their development efforts to take full advantage of an unprecedented long-term extension of the industry's key incentive mechanism.

Five-year phase out of support mecahnism gives industry stability to plan ahead
Five-year phase out of support mecahnism gives industry stability to plan ahead

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Congress voted in December to phase out the $0.023/kWh production tax credit (PTC) and alternative 30% investment tax credit (ITC) over five years, allowing projects that start construction before the end of 2019 to receive the subsidy.

"I think that almost everybody in this industry was surprised by the extension, so we're clearly seeing adjustment by developers who are getting out and working on projects," Ted Brandt, CEO of Marathon Capital, told the recent Infocast Wind Power Finance and Investment Summit.

Not only have extensions in the past been for only one or two years, but there had also been significant doubt whether the tax credits would be renewed at all this time around. This created a situation where developers were pushing to advance only those projects able to qualify for the PTC under the old deadlines.

"Ultimately the long-term extension is great. But it's going to take some time to reset and get development cycles going," said Ben Jacoby, managing director at Paragon Energy Advisors. "It seems like we're back to this imbalance of not having a lot of projects that were developed and thought of in the context of this long-term extension."

The longer planning horizon is helpful, said Tom Carbone, president of Tri Global Energy. "It breathes new life into some of our earlierto mid-stage developments," he said.

A priority for the industry will be to work on projects that can start construction this year so they can qualify for the full-value PTC. The size of the credit drops 20% per year in 2017, 2018, and 2019 before expiring.

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