US tax proposals cut wind support

UNITED STATES: A new tax bill launched in the US Congress could cut the production tax credit (PTC) from its current $0.023/kWh to $0.015/kWh.

The tax bill was introduced by Republican members in the US House of Representatives

The PTC, paid for the first ten years of a project's life, is a major driver in the current rush of wind development in the US.

But the proposed bill would change the terms of PTC qualification, defining a project's start of construction.

Construction would have to be "continuous" rather than a project being placed in service within four years of when construction began.

This change would apply to all projects not yet in service as of the date of enactment, whether or not construction has begun, said law firm Stoel Rives.

The PTC was being phased out anyway, and wind backers have slammed the proposed changes.

"By derailing a bipartisan agreement to phase out the wind energy PTC, the House proposal strips away the investment certainty Congress promised wind developers just two years ago," said the American Wind Energy Association.

Keith Martin of law firm Norton Rose Fulbright warned: "Financings of wind projects may stall until the measure ultimately clears Congress. The bill will also complicate life for developers bidding on new power contracts.

"The American Wind Energy Association warned attendees at its annual finance conference in late October not to panic if the bill backtracks on the phase-out deal the industry negotiated for production tax credits at the end of 2015. It is optimistic that the Senate will act as a "firewall" and preserve existing law. However, it also warned against complacency."

The bill must pass both houses of the US Congress. A Senate version will face stiff opposition from among others, Senator Chuck Grassley, "grandfather" of the PTC.

Also the bill includes an extension to a nuclear power tax credit, while also cutting credits for electric vehicles.

According to financial newswire Bloomberg, some analysts estimate more than $11 billion in benefits would be lost in the next decade.