United States

United States

US wind pins hopes on 'build back better' bill approval

Climate and infrastructure legislation clears House of Representatives, awaits Senate green light for crucial tax credit provisions

The bill includes tax credits for transmission, on top of $5 billion for long-distance transmission in the bipartisan infrastructure bill signed into law on 15 November (pic: Official White House Photo by Cameron Smith)
The bill includes tax credits for transmission, on top of $5 billion for long-distance transmission in the bipartisan infrastructure bill signed into law on 15 November (pic: Official White House Photo by Cameron Smith)

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Valuable tax credits for onshore and offshore wind in the US will be extended to 2026 if the "build back better" (BBB) bill, passed by the US House of Representatives last week, gets through the US Senate and is signed into law. 

The $1.75-trillion Democratic-led legislation, based on President Joe Biden’s social and climate agenda, offers a novel advanced manufacturing production credit for wind blades, nacelles, towers and offshore foundations.

Especially important for wind is the extension of the full credit amount of the production tax credit (PTC), at $0.025/kWh, ramping down after 2026. The BBB bill would also allow taxpayers to receive “direct payment” instead of a tax credit, which is invaluable when the project owner does not have enough tax liability. 

The investment tax credit (ITC) would be extended for projects that begin construction before the end of 2026 and then phased down over two years. The full ITC — a tax credit typically used for offshore wind projects because they are so capital intensive and have a long development timeline — is 30%. 

Under the BBB bill, when companies offer apprenticeships and higher-than-average wages, or meet certain domestic-content requirements, the tax credits are higher. 

The “buy American” component to the manufacturing credit could backfire, however, as the supply chain is already so stretched because of Covid-19, as well as logistics and commodity price hikes.

The bill also offers an estimated $15 billion for new transmission. “The BBB transmission tax credit could increase renewable energy  in the country by almost half by enabling large long lines to the best resource areas to move forward,” Rob Gramlich, founder and president of Grid Strategies, told Windpower Monthly. 

This is in addition to about $5 billion for a long-distance transmission in the bipartisan infrastructure bill, also known as the Invest in America Act, signed into law by Biden on 15 November. 

“The spending is significant, but $20 billion in spending in the two bills is about a year’s worth of transmission industry spending, so it’s not as transformative [for transmission] as some were hoping,” Gramlich added.

Additionally, the bill allows the Department of the Interior (DoE) to hold offshore renewable energy lease sales in federal waters in the Atlantic off the coast of North Carolina, South Carolina, Georgia, Florida, and in the Eastern Gulf of Mexico, and off other US territories including Guam, Puerto Rico and the US Virgin Islands.

“The Build Back Better Act includes the most significant federal investments ever in renewable energy and will propel the offshore wind industry forward in the United States,” said Liz Burdock, CEO and president of the Business Network for Offshore Wind.

Frank Maisano, energy strategist and partner at Washington DC-based law firm Bracewell, said the extended tax credits have broad bipartisan support and a “great chance” of staying in the final bill. The Democrats only have a 51-50 majority in the Senate, and some moderate Democrats have been balking at some of the contents of the BBB.  

Maisano said manufacturing credits are also likely to survive fierce debate in the Senate: “Manufacturing is an essential sector to clean energy development and our energy transition that is widely supported by both Democrats and Republicans,” he said.

The BBB bill has been scaled back substantially because of the objections of one key moderate Democrat, Joe Manchin of West Virginia, chair of the Senate Committee on Energy and Natural Resources, and a supporter of the coal industry.

The clean energy standard was stripped from the original draft of the bill after Manchin refused to support it. The programme would have rewarded utilities for transitioning to clean energy, including wind, and penalised those that did not.

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