CLAIM: The PTC is a government subsidy that doesn’t really help the wind industry grow and hasn’t resulted in jobs or economic activity since its inception.
The PTC is a credit used by businesses to expand their renewable electricity generation capability and provide jobs and expand the market for renewable electricity.
REVISED January 9th, 2013
In the final hours of 2012, Congress passed the American Tax Relief Act to avert the fiscal cliff and extend a dozen renewable energy and energy efficiency tax provisions. The legislation extends the Renewable Energy Production Tax Credit (PTC) for wind for one year. Just as important, the legislation includes language that allows all renewable energy projects eligible for the PTC that “start construction,” as opposed to being “in service,” in 2013 to claim the credit. The measure also extends the option to claim the investment tax credit (ITC) in lieu of the PTC.
In addition, the legislation extends credits that support the development of a cleaner and more sustainable transportation sector including credits for plug-in motorcycles and three-wheeled vehicles, alternative fuels, biodiesel and cellulosic biofuel. The definition of cellulosic biofuel was expanded to include algae-based biofuel.
These short-term extensions have provided a critical lifeline that gives the renewable energy industry time to enact long-term policy support mechanisms that will drive low cost capital investment to renewable energy technologies while supporting their continued scale up and corresponding cost declines.
Here are the facts on the PTC:
- The Renewable Energy Production Tax Credit (PTC) is not a cash handout from the government. Instead, it is “a per-kilowatt-hour [federal] tax credit for electricity generated by qualified energy resources” – and only applicable to businesses who are already successfully generating power. Thus, it has the effect of leaving more of the money from sales of wind-generated electricity in the private sector. (Source: Department of Energy, http://bit.ly/sPVfSX).
- The one-year PTC extension included in the 2013 bipartisan fiscal cliff bill will cover all wind projects that start construction this year. Companies that manufacture and install wind turbines sought that revised definition to allow for the 18-24 months it takes to develop a new wind farm. (Source: American Wind Energy Association, http://bit.ly/TFZUKp)
- The PTC extension saved jobs. ACORE President and CEO Vice Admiral Dennis V. McGinn notes, “As a result of the extension, over 37,000 American jobs will be saved, more renewable energy jobs will be added to our recovering economy, and domestic wind turbine manufacturing will resume in America’s 500 wind turbine manufacturing facilities.” (Source: American Council On Renewable Energy, http://bit.ly/Vw8TQ7)
- The PTC extension also helps ensure that our wind turbines continue to be manufactured domestically, instead of being imported from overseas. In a statement from the American Wind Energy Association, interim CEO Rob Gramlich says, “Now we can continue to provide America with more clean, affordable, homegrown energy, and keep growing a new manufacturing sector that’s now making nearly 70 percent of our wind turbines in the U.S.A.” (Source: American Wind Energy Association, http://bit.ly/TFZUKp)
- The PTC works. According to the National Renewable Energy Laboratory, “In 2011, wind power was again (for the sixth time in seven years) the second-largest new resource added to the U.S. electrical grid in terms of gross capacity additions.” (Source: National Renewable Energy Laboratory, http://1.usa.gov/PU0IpB)
- According to the leading wind energy trade group, the PTC has resulted in a 90% drop in the price of wind power since 1980, benefiting utilities and customers. (Source: American Wind Energy Association, http://bit.ly/wys7NI)
- In 2012, a group of 19 business and investment leaders called for continued support of the PTC, including Starbucks, Levi Strauss, North Face, and New Belgium Brewing, among others. They note that allowing an expiration of the PTC is equivalent to “levying a tax on companies committed to buying American energy” and, “In today’s economic climate, a tax hike on American businesses buying American renewable energy is unwarranted.” (Source: Ceres, http://bit.ly/SZdtaI)
- Business certainty is important to maintain a healthy American wind industry. Michael Bernier, a senior manager at Ernst & Young who specializes in renewable energy tax credits, highlights the business certainty that the PTC extension provides: “Providing that certainty of ‘OK, we’re going to get this tax credit,’ that helps you mitigate your risk.” (Source: Fox Business, http://fxn.ws/10UCer6)
- The PTC extension has garnered bipartisan praise around the country. Governor Sam Brownback from Kansas said the tax credit inspired $3 billion in wind power investment in Kansas during 2012 and maintenance of the program was necessary to “continue to build wind energy and the jobs and electricity that is associated with it.” (Source: Topeka Capital-Journal, http://bit.ly/WkJ6GF)
- Prior to the 2013 extension, the PTC received bipartisan support from over 100 members of the House of Representatives. One strong supporter of the PTC, Sen. Charles Grassley, R-Iowa, noted that the PTC is just one of many energy incentives in the U.S. and added, “No single energy tax incentive should be singled out over others before a broad-based tax reform debate takes place.” (Source: Sioux City Journal, http://bit.ly/TOaaPT)
- Senator Mark Udall, D-Colo. credits the PTC for local economic growth in his state. His website says, “The Production Tax Credit for wind has helped attract clean energy businesses to invest in the United States, including Vestas, which created almost 2,000 jobs in Colorado.” (Source: Senator Udall, http://1.usa.gov/MywZBc)
- Congressman Steve King, a Republican from Iowa, tells a story similar to Senator Udall’s. Congressman King highlights the PTC’s effects in his state, “Iowa was the first state to generate 20 percent of its electricity from wind. Now, wind supports as many as 5,000 Iowa jobs, and $11 million in annual land lease payments to Iowa farmers. Iowa wind has prompted $300 million in private investment in Iowa manufacturing facilities.” (Source: Congressman King, http://1.usa.gov/ZS3Ud8)
- The PTC has strong public support as well. In a May 2012 United Technologies/National Journal poll, almost two-thirds—64 percent—of those surveyed said that Congress should extend federal tax credits that encourage production of alternative-energy sources, such as wind, that was due to expire at the end of 2012. (Source: National Journal, http://bit.ly/KRLSzx)
- Tax credit programs–like the PTC–have been extremely effective policy tools to expand domestic energy production and develop new technologies, including, for example, shale gas. U.S. government support for oil, natural gas, and coal totaled nearly $600 billion from 1950 to 2010, according to a study by consulting firm Management Information Services, Inc., (MISI) prepared for the Nuclear Energy Institute. Many of these incentives have been permanent fixtures of the tax code for five or more decades. (Source: Management Information Services, Inc., http://bit.ly/HCZcaa)