This article excerpt is taken from the forthcoming issue of Renewable Energy Focus magazine (March/April issue). To register to receive a digital copy click here.
Around 8.5 GW of wind will be added this year alone to the current cumulatively installed US capacity of 46,919 MW, following on from a bumper 6.8 GW in 2011. Wind-generated electricity is on a correspondingly rapid rise. Last year saw a 27% rise in electricity generated by wind, accounting for 3% of total US generation, according to recent figures from the Energy Information Agency (EIA).
But the market is set to crash in 2013 with the expiration at the end of this year of a critical tax credit – failure to extend the PTC could cost 37,000 jobs and reduce wind investments from US$15.6 billion in 2012 to US$5.5bn in 2013, industry analysts say.
Bruce Hamilton, Energy Analyst at consultants Navigant, says that installations are set to collapse to 2.4 GW in 2013 after an "artificially high" year in 2012, as wind developers race to get the blades turning on their projects.
Hamilton is the lead author on the report, Impact of the Production Tax Credit on the US Wind Market, which concludes that the PTC has an impact of an incremental 5-6 GW of installed capacity during each year of the extension.
The PTC offers investors a fixed return of US$0.022/kWh, typically over 20 years, and has been the main driver for the industry for two decades. The only remaining incentive would be the Renewable Portfolio Standard (RPS), which sets targets for green electricity generation – but only in 30 states.
"RPS would keep the industry going without the PTC at a much lower rate," Hamilton says. "The wind industry could stand on its own two feet, but it would limp along."
The recent failure to extend the PTC introduced by Senator Debbie Stabenow, a Michigan Democrat, followed another attempt in February to attach a PTC amendment to the payroll tax extension.
Many more attempts to hitch the PTC extension to legislation progressing through Congress will most likely go to the wall before politicians turn their full attention to energy tax credit extensions.
Rob Gramlich, Senior Vice President for Public Policy at the American Wind Energy Association (AWEA), says: "It's not that the PTC has been singled out – it's just in a category of issues that haven't been taken up yet. A couple of dozen business tax credits historically always move together in December. We're working hard to get it much earlier in the year than it's been done in the past."
The bipartisan passage of the payroll tax bill and the likely passage of the highway re-authorisation bill have raised hopes that the political impasse of last year has eased.
"In an environment where no substantive legislation has been passed for about a year; if we get two significant pieces passed through within two months, we may have a little window of legislative activity that could open possibilities now the level of gridlock has decreased," Gramlich says.
One major piece of bipartisan legislation introduced by House Representatives Dave Reichert, a Washington Republican, and Earl Blumenauer, an Oregon Democrat, originally sought to grant a four-year extension to the PTC for wind energy. But a year-long extension at the 11th hour, or even next year, now seems a more likely outcome.
"That's the way it's always been. We've seen this movie before," Gramlich says. "We're optimistic the PTC will be passed but we can't guarantee when. We just have to keep looking at each legislative vehicle as it is put together to see what the opportunity looks like."
Senator Stabenow's PTC amendment to a transport bill failed to pass the Senate because of an additional inclusion of the 1603 cash grant programme for clean energy projects. At the same time, the Republicans in Congress have spent the past year battling with Democrats and the Obama Administration over spending-cuts to reduce the US deficit of US$15.5 trillion.
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