State policymakers in the US should try to structure their wind power incentive programs so they leverage, not undercut, the value of the federal wind power production tax credit (PTC), says a new report from the Lawrence Berkeley National Laboratory. The PTC has been a key driver in the development of the US wind industry, but has a provision that prevents "double dipping" when a project is also eligible for state incentives. With a growing number of states using tax incentives to stimulate wind power development, the report says, it is critical to determine which ones will reduce the value of the PTC. That is not easy to determine. "Federal tax law and IRS rulings are not sufficiently clear to specify exactly what kinds of incentives trigger this offset," the report concludes. While state investment tax credits seem most likely to reduce federal PTC payments, the impact of state production tax credits as well as state property and sales tax incentives is more uncertain. "Further IRS rulings will be necessary to gain clarity on these issues," the report says of the role of the Internal Revenue Service. Even if a PTC reduction is triggered, however, state incentives can still provide some value to wind power developers because the offset is not one-for-one. State incentives generally lose only about 40% of their value through a reduction in the PTC, the study says. State programs also provide a "valuable backstop" to wind power producers should the PTC not be extended when it expires at the end December 2003.
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Senior Renewable Energy Analyst (WindGEMINI Product Lead) DNV GL Bristol (City Centre), City of Bristol