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As US wind power gets tax extension boost Spanish industry fights for its life

As the Spanish wind industry faces the crushing prospect of an 11% tax to be levied on it, its US counterpart is sighing with relief after proposals to extend the wind energy Production Tax Credit (PTC) gained “overwhelming” bipartisan support in the Senate Finance Committee.

The $3.3bn one-year extension to the PTC – estimated to drive up to $20 billion a year of private investment a year into US wind farms and thus deemed critical for ongoing onshore wind development - was supported 19-5. It is due to expire at the end of this year. Without an extension, Navigant Consulting estimates that 37,000 jobs will be lost by early 2013.

Meantime, the Senate Committee also approved an extension of the 30% Investment Tax Credit (ITC), which provides an incentive for the development of offshore and community wind projects was also supported. "We applaud the committee for this act of leadership to move critical policies forward in a difficult environment," said Denise Bode, CEO of the American Wind Energy Association. "This was an extremely important step to provide critical certainty to keep people at work in wind energy manufacturing and construction."?

The extensions, introduced as part of a $205 billion tax package in a revised bill of the Family and Business Tax Cut Certainty Act of 2012, will benefit projects starting construction next year. However first the proposal needs to get the green light from the full Senate, which is unlikely to happen until after the summer break. Meantime, with US elections coming later this year and presidential hopeful Mitt Romney having already made clear his opposition to the PTC extension, the wind industry is by no means safe as yet.

Spanish anguish

Meantime in Spain, the wind industry is “fighting for its life”, says the Global Wind Energy Council, referring to the prospect of a legal battle being launched against the Spanish government over its planned 11% tax on wind generation.

“Just a few months ago, the government let the support scheme for the industry lapse, citing the economic crisis and falling electricity demand. Now, the government is contemplating a discriminatory tax on wind energy, much higher than for other forms of generation, further feeding the myth that the renewables sector in Spain bears some responsibility for the Spain’s dire economic straits. Nothing could be further from the truth,” it said in a statement this week.

Last month, Rocío Sicre, Chairman of the Spanish Wind Energy Association (AEE), told a press conference that the tax on wind generation “would be dubious legally”. Establishing a charge that is imposed in a general and indiscriminate way on the production of wind power could overlap with the Tax on Electricity and with some regional environmental taxes that already tax the production of electricity, she noted.

According to the AEE, if the Spanish government proceeds, the tax will cost the wind industry around €3bn, slash the profitability of wind farms by 30% and leave about 15% of the facilities in place potentially unable to meet the terms of the payment of their debts.

“It would undermine legal certainty because it breaks the rules half way through the game and it would be the final straw which breaks the trust of domestic and international investors which would increase the country-risk", Sicre said. 

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Policy, investment and markets  •  Wind power