WASHINGTON, DC, USA, June 27, 2007.
Most of the additions to wind power in the United States will occur in northwestern regions under a five-year extension of the production tax credit for green power.
Under a five-year full extension, other technologies grow in addition to wind, says the U.S. Energy Information Administration in an analysis of extension options for the wind PTC which examine no extension, a five-year credit extension ranging from 1¢ to 1.9¢ per kWh, and a permanent credit extension of the same range. The analysis was requested by counsel for a federal committee that would apply to wind generators only.
“Biomass, which is assumed to be open-loop and receives one-half of the full credit amount, shows strong growth, increasing in capacity by nearly 8 gigawatts,” the report notes. “Municipal solid waste and geothermal resources also increase their electricity production, but their capacity increases by fewer than 500 MW.”
“Despite the large increase in biomass power, wind growth is not dampened under the five-year full PTC extension case when compared with the exclusive credit extension,” it continues. “In both scenarios, most of the wind additions occur in northwestern regions of the U.S. where biomass resources are limited.”
“Thus, with a five-year extension, wind and biomass were not found to compete since the resources are in different areas,” it concludes. “Given the renewable credit incentive, the mid-Atlantic and other eastern regions generate additional power from biomass, while the west primarily adds new wind.”
The full five-year PTC extension would reduce CO2 emissions more that the wind-only extension, although the difference by 2030 is only 1% of total emissions and “the cost to the U.S. Treasury is much larger when the credit is extended for additional renewable technologies.”
“All long-term projections engender considerable uncertainty” and the report notes that it is “particularly difficult to foresee how existing technologies might evolve or what new technologies might emerge as market conditions change, particularly when those changes are fairly dramatic.” The potential impact of high levels of wind generation on regional electricity grids is subject to significant uncertainty and some costs, such as additional reserve capacity, under-utilisation of wind capacity and reduced value of wind generated during off-peak hours, are accounted for in the EIA analysis.
Other costs such as potential need for energy storage and localised operational changes are not explicitly considered, but they are believed to be minor at the levels of wind generation projected in these scenarios, the report notes.
Currently, a PTC applies to facilities placed in service by the end of next year, with wind, closed-loop biomass and geothermal receiving a credit of 1.9¢ per kWh. Electricity generation from municipal solid waste, landfill gas, open-loop biomass and hydro is eligible for a PTC equal to one-half of that credit.
“Extending the PTC for wind-generating facilities is expected to have a moderate effect on fuel use, electricity prices and emissions,” it explains. “Projections of wind capacity and the resulting impacts of the extension depend on the amount and duration of the production tax credit.”
In a reference scenario, wind capacity increases from 10 GW in 2005 to 18 GW in 2030, and extending the 1.9¢ credit for five years results in an additional 6 GW of wind capacity by 2030. A similar five-year extension of the PTC with a lower credit price of 1.5¢ would increase 2030 wind capacity by the same amount but cutting the current PTC to 1¢ “is not expected to induce incremental wind capacity over reference case levels.”
A permanent extension of the full tax credit for wind would result in 38 GW of additional wind capacity above the reference case by 2030, while lowering the credit to 1.5¢ and 1¢ limits the 2030 capacity increases relative to the reference case to 16 GW and 6 GW respectively.
