By the time you read this, the production tax credit (PTC) will have expired. However – unlike previous PTC expirations – the wind industry faces a soft landing this time around.
To qualify for the PTC, project developers must have demonstrated work of a significant nature, incurred 5% of the project’s cost by Dec. 31, 2013, and ensured the wind farm is under continuous construction. Wind projects started by Dec. 31 and placed into service by Dec. 31, 2015, are also eligible to qualify for the PTC. The Internal Revenue Service theorized that if a wind developer met an in-service date, so-called “continuous efforts” would be assumed.
“We continue to see evidence that the PTC is an effective tool that is working,” Rob Gramlich, senior vice president of public policy at the American Wind Energy Association (AWEA), tells NAW at press time. “The change made to the PTC in 2013 allows projects that start construction this year to qualify for the PTC, which acknowledges the 18-24 month timeline of wind projects, and will allow companies to continue to build projects past 2013.”
And with clear marching orders, wind developers and suppliers spent the remainder of 2013 signing agreements. That’s great news for the industry, right? Well, yes and no.
I’m concerned that – having recently secured what amounts to a two-year window – some lawmakers may be suffering from PTC fatigue and, therefore, may not be fighting as hard for its extension this go-around.
More damning is that wind energy’s detractors are as galvanized as ever. Therefore, count on plenty of political blood being spilled before all is said and done.
“Opponents have been trying to label the [wind] tax subsidy a form of ‘welfare’ on the theory that he who manages to put his labels on the opposing positions wins the debate,” notes Keith Martin, a partner at law firm Chadbourne & Parke.
As was the case with the last extension, AWEA maintains that the best strategy for a PTC extension would be to attach it to a broader legislative vehicle.
“The legislative vehicle could be tax reform, an extenders package or something else,” notes Gramlich. “Ultimately, our industry will begin to feel the impacts of uncertainty in 2014.”
True, Congress has previously allowed the PTC to lapse, only to retroactively extend the incentive at a later date. However, the longer it takes to find the proper legislative vehicle (in whatever form), the darker the prospects become for an extension.
On second thought, perhaps that soft landing won’t be as cushiony as first envisioned. w