At press time, legislators are leaning dangerously close to the so-called fiscal cliff – and with it – the expiration of the production tax credit (PTC) for wind.
Putting aside for a moment the loss of future wind-generated electricity, job losses by the thousands and a scaling back of research and development, PTC uncertainty also affects the level of financial investment coming into the wind industry.
According to a report by the Maguire Energy Institute at Southern Methodist University, if the PTC is allowed to expire, approximately $15 billion in private investment could vanish. Therefore, absent support for renewables at the federal level, the wind industry needs to find other ways to keep the capital flowing.
“As an industry, we need to drive toward a permanent solution,” explains Tim Rosenzweig, CEO of turbine manufacturer Goldwind USA. “One-year extensions are not a viable alternative – we need to be thinking about a responsible phaseout of the PTC and a phase-in of a permanent support mechanism that is in line with the other major energy sources, such as MLPs.”
An MLP is a business structure that is taxed as a partnership, but whose ownership interests are traded like stock on a market. Whereas profit from publicly traded corporations are taxed at the corporate and shareholder level, income from MLPs is taxed only at the shareholder level because it is treated as a partnership for tax purposes.
However, as written, MLPs do not currently apply to renewables, such as wind and solar. Therefore, it would take an act of Congress to modify the current tax structure to make MLPs applicable for renewables, just as they have applied to the oil and gas industries since the mechanisms were written into the tax code in 1987.
And that’s precisely what the MLP Parity Act, which was introduced in June 2012 by Sens. Chris Coons, D-Del., and Jerry Moran, R-Kan., aims to do: level the playing field. Congress is expected to take up the broader issue of tax reform later in 2013, and MLPs for wind are likely to be part of the debate.
The fact that the wind industry must (again) go hat-in-hand to Washington, D.C. – to fight for the very same privileges enjoyed by the oil and gas industries – rings oddly familiar, doesn’t it?