United States

United States

US wind seeking 'tax policy parity' with solar

The American Wind Energy Association (AWEA) has staked its case that the US wind energy sector should have access to the same extension of the Investment Tax Credit (ITC) the solar industry is seeking.

Increasing trade tariffs is adding to the cost of US wind (pic: Enel)
Increasing trade tariffs is adding to the cost of US wind (pic: Enel)

"We’re seeking tax policy parity to cost-effectively meet strong consumer demand for clean energy," said Aaron Severn, senior director of federal affairs at AWEA.

"The market has changed significantly since 2015. National carbon policy hasn’t materialised and we have new tariffs significantly raising the cost of wind energy and US manufacturing.

"At the end of the day, it’s most impactful to have wind — both onshore and offshore — and energy storage included alongside solar in a multi-year extension of the Section 48 Investment Tax Credit," Severn added.

This represents a U-turn in policy for the wind lobbying group, which for the last few years has backed a phasing out of the ITC and Production Tax Credit (PTC), saying that wind needs policy certainty and can stand on its own two feet.

However, continuing the 30% tax credit for wind, solar and storage is not considered likely in the current political climate in Washington DC, said Anthony Logan, senior wind analyst at Wood Mackenzie Power & Renewables.

"I’d be very surprised. I don’t think [President] Trump wants to sign anything renewables-friendly," he said.

Logan suggested that a so-called ‘extenders bill’ would only pass if buried in other legislation Trump does support.

The solar ITC is currently worth 30% of the capital invested and is being stepped down starting next year to a permanent 10% in 2022.

The Solar Energy Industries Association (SEIA) — and AWEA — are seeking a multi-year extension at 30%.

Wind’s own 30% ITC is being phased-out completely out over four years, starting in 2020. The PTC, at $25/MWh, had almost completely expired and is currently worth "significantly less" than wind’s ITC, said Logan.

When the phase-out of the PTC was first envisioned several years ago, there was no trade war with China and no tariffs, Logan noted.

WoodMac estimates current tariffs can add 5-20% to the cost of a wind project.

US duties on imported towers from Canada, Indonesia, South Korea and Vietnam are also almost certain to be added within months because of alleged dumping by those countries.

Logan said the pressure from tariffs will be especially harsh next year when the supply chain become strained as developers rush to build projects during the phase-out.

There has already been repositioning by OEMs, starting in Q2 of 2018, to avoid tariffs but by next year there will be little flexibility in the supply chain, he said.

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