The 5 year extension of the Production Tax Credit (PTC) has been the most significant stimulus policy the wind industry has seen in several years, and is expected to revive wind energy production in the U.S through the end of 2020.
The wind industry had experienced growth up until the expiration of the PTC in 2014, which subsequently led to the decrease in installed wind capacity in the years where the PTC lapsed.
How will the extension work? The PTC will remain at full strength through 2016, with subsequent incremental reductions in value based on the start of the project, for example - 80 percent for 2017, 60 percent for 2018 and 40 percent for 2019 -- before expiring in January 2020.
The PTC is a part of a larger appropriations bill, the Consolidated Appropriations Act, 2016, and is retroactive to January 1st 2015.
What does this mean for the industry? Big things! As the demand for low-carbon fuel sources continues to increase, the tax credit makes the industry more attractive to investors. With policy certainty in place, companies can now expand project development through the end of the decade, in turn creating jobs for the renewable energy sector.
According to Mike Lorusso, managing director and group head of
CIT Energy Finance, the extension of the PTC has rejuvenated the industry. It has jump-started new deals and given the industry a nice lifeline.
The PTC has helped spur innovation in wind turbine technology, causing wind's costs to fall drastically. The multi-year predictability will help continue this trend and break the repeated boom-bust cycles the U.S. wind energy industry has weathered through two decades of uncertain tax policies.