Wind power advocates stay calm as tax credit dies down

Jan 1 - Jennifer A. Dlouhy Houston Chronicle

The stroke of midnight Tuesday marked not just the end of 2013, but also the death of a popular tax credit that has helped finance wind farms and other renewable energy pro-jects across the U.S.

The production tax credit expired without any immediate prospects for renewal. But unlike previous years, supporters aren't singing dirges just yet; instead, they hope to bring the tax incentive back to life sometime in 2014.

The renewable energy production tax credit allows project owners to reduce their tax bills by 2.3 cents for every kilowatt-hour of electricity they produce over a 10-year period. But the 21-year-old credit has sputtered in and out of existence as Congress let it expire at least four times only to renew it later (as little as one day afterward in January 2013).

The on-again, off-again scenario has in the past halted development of renewable energy projects and prompted some manufacturers to abandon the field altogether. And it traditionally has inspired a frenzy of lobbying on Capitol Hill and construction work in the field, as renewable project developers begged lawmakers not to let the credit lapse and rushed to get projects in operation before the Dec. 31 deadline.

Supporters of the tax credit said that the New Year's Eve expiration used to be like staring over the edge of a cliff. But changes made by Congress and the Internal Revenue Service in 2013 mean the expiration is just the crest of a long downward slope.

Now, a developer can take the credit as long as it incurred 5 percent of total capital costs on a qualifying renewable energy project before the credit expired -- a change from previous rules that required the facilities to be operating first. Developers have been inking deals hastily before year's end to qualify, but any construction work can continue well beyond the singing of "Auld Lang Syne."

As long as developers put 5 percent deposits down on qualifying renewable energy projects initiated in 2013, they have until 2015 at least to put the facilities in service and claim the credit over the following 10 years.

It takes time

Rob Gramlich, senior vice president for public policy at the American Wind Energy Association, said that allowing projects that started in 2013 to claim the credit acknowledges the 18-24 month timeline of wind projects.

The production tax credit is available for an array of renewable power projects, including those involving geothermal, solar and marine power. But it especially has been a boon to the wind industry, which saw utilities sign a record number of power purchase agreements in 2013.

Gramlich says that's evidence that the production tax credit is effective.

The opponents

But critics say the credit has outlived its usefulness. In a letter to congressional tax-writers, Rep. Mike Pompeo, R-Kan., and 53 other lawmakers said the credit has become more valuable to wind producers than the electricity they generate.

Although Congress historically has renewed the production tax credit in a single stroke along with other expiring tax provisions as part of what they call an "extenders package," lawmakers in 2013 held off because of the prospect of a bigger tax overhaul in 2014. A straight renewal of the tax credit or broader changes could come as part of fundamental tax reform.

Single-credit approach

Sen. Max Baucus,the chairman of the Finance Committee, recently unveiled his plan eventually to replace the production tax credit and alternative fuel incentives with a single credit that rewards clean energy.

But President Barack Obama has nominated Baucus to be the U.S. ambassador to China, and it is unclear whether the Montana Democrat's proposal could gain much traction without him to spearhead it.

Obama has asked Congress to extend the tax credit permanently at a price tag of $24.7 billion over the next 10 years.

Even though they have some short-term certainty, Gramlich said the wind industry "still faces uncertainty in the medium and long term and needs Congress to address that" in 2014.

"Ultimately," he added, "our industry will begin to feel the impacts of uncertainty in 2014."

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