United States

United States

Tax credit extension logic

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A three year extension of wind's federal production tax credit (PTC) in the US will more than double the amount of wind generation that could be expected by 2010 without the incentive, says an analysis by the US Department of Energy (DOE).

The DOE assessed the impact of energy policy measures currently working their way through Congress and compared them with predictions in the agency's latest Annual Energy Outlook. It found that by 2010, wind generation with the PTC will total 50.64 TWh compared with 24.07 TWh without a PTC extension. Installed wind capacity will grow to 15.41 GW with the PTC compared to 8.01 GW without.

The analysis notes, however, that while the PTC extension does support significant growth in generation, "much of the additional construction of wind capacity is due to the accelerated construction of units that would have occurred later." In fact, the gap closes significantly over time. By 2025, installed capacity under the PTC scenario would be 18.02 GW compared to 15.99 GW without the extension. Total annual output would be 60.39 TWh versus 53.16 TWh. The DOE qualifies its findings, saying they are "not statements of what will happen but of what might happen."

A three year PTC extension has been passed in the House of Representatives as part if its energy legislation, but that energy bill stalled in the Senate before Christmas. A pared-down version introduced in February would also extend the credit until the end of 2006. It may take several months, however, for that bill to pass into law.

The failure to pass an extension of the PTC before the end of last year has sent the US wind industry into a slump. While the debate continues, however, a short term fix is possible. A one year extension of the PTC has been included in a package of expired tax credits being attached to a corporate tax reform bill that was expected to pass the Senate in late March.

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