One hotly disputed topic between President Obama and Republican nominee Mitt Romney in the upcoming presidential election is the allowing the extension or expiration of the Wind Energy Production Tax Credit, or PTC.
This tax credit was originally part of the Energy Policy Act of 1992, and it provides a 2.1-cent per kilowatt-hour credit for the first ten years of operation of a renewable energy facility. This tax credit has been crucial to the wind industry’s growth and success over the past twenty years since it reduces the cost of producing wind energy by about one-third. Not only does it make wind a more lucrative option, but it also makes wind viable in areas of America where it was previously economically infeasible.
It is hard to argue that wind energy is bad for America. It provides clean, renewable energy at a cost that is comparable to current competitors. In addition, it creates jobs in America, as opposed to oil and natural gas that is largely harvested in its crude form by other nations and purchased by America for refinement. Other nations with less technologic resources than the United States are vastly surpassing us in their use of wind energy; Denmark gets more than 20% of all its electricity and Spain gets almost 10% of its electricity from wind, while the U.S. meets less than 1% of its entire energy demand from it.
Following the years in which it was allowed to expire, installation of wind systems showed dramatic decreases. The expiration of the PTC in 2000, 2002, and 2004 led to massive falls in wind energy installation. The industry always bounced back after the credit was renewed, and in 2006, 16% of the worldwide installed wind capacity came from the United States. In addition, the American Wind Energy Association estimates allowing the wind PTC to expire will cost 37,000 jobs, while extending it will save 54,000 jobs.
The up-and-down nature of the U.S. wind industry is primarily due to the temporary nature of the PTC. Due to the short timeline of the tax credit, installers are more likely to work on smaller-capacity projects so that they can finish before the deadline. This causes inefficiencies in the industry and prevents companies from having large-scale long-term projects in fear of the expiring tax credits. Furthermore, private investors are less likely to invest in wind due to the short 1-2 year cycle of the PTC.
If the Congress created a bill to extend the wind PTC for 5-10 years cycles as opposed to 1-2 years, the industry would see significant benefits. Not only would it create thousands of jobs, but also it would stabilize the industry, allowing for more private investors and more large-scale installations that are currently stifled due to fear of expiring tax credits. If the PTC is enacted on a longer scale, the industry would be able to finally find its footing. Then, perhaps the credit would no longer be necessary and the wind energy in America would thrive on its own.