PTC/ITC: a brief history

The production tax credit for wind facilities has expired three previous times over the previous ten years: after 1999, 2001 and 2003. In each instance, capacity additions the ensuing year dropped at least 73%.

Under the provision due to expire at year-end 2008, an income tax credit of 1.5 cents/kilowatt-hour is allowed for the production of electricity from qualified wind energy facilities and other sources of renewable energy. Adjusted for inflation, the current value of the credit is 2 cents/kilowatt-hour of electricity produced. It is useful only for utility-scale wind turbines. It does not apply to small turbines used to power individual homes or businesses.

The solar industry is seeking an eight-year extension of the 30% business investment tax credit and a six-year extension of the 30% residential investment tax credit, along with the elimination of an existing $2,000 limit on the residential credit. Solar backers also want to eliminate the public utility exception to the investment tax credit and permit corporate and individual taxpayers to claim it against the alternative minimum tax, which is applying to more taxpayers each year.

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