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PTC Extension Deadline Still Looms: What You Need to Know

The majority of wind industry professionals agree that the wind market is finally reaching a point of maturity. The market is no longer divided by regions, as the standards implemented have helped the wind industry reach a level of maturity. But one dark cloud still hangs over further growth: the wind power production tax credit (PTC). The income tax credit of 2.2 cents per kilowatt-hour for wind turbine electricity is key in encouraging renewable energy innovation and job creation in the US.

Where does the PTC stand?

When we last wrote about the widespread support for the PTC, we emphasized the devastating effects on the economy should Congress decide not to act. We’re now less than five months away from the set expiration date, and Congress is still stalling on renewing the credit. This inaction has already resulted in job cuts: Gamesa, Spain’s largest wind turbine company, plans to furlough 165 employees this fall and Vestas, a turbine manufacturer, anticipates 1,600 layoffs if the credit expires. Navigant Consulting reported an expected 10,000 lost jobs by the end of 2012 due to uncertainty about the PTC. If the PTC expires, the group expects companies will cut another 37,000 jobs by the end of 2013.

Anticipation about the outcome is only sparked further with the presidential election this year. An election year typically causes business leaders to err on the cautious side, and this is only amplified in regards to the wind industry. It is a good sign that the credit received bipartisan support, but many suspect Congress’ decision is on hold until after the November election. Until then, US market demand remains low.

What are the recent developments?

During the American Wind Energy Association’s (AWEA) WINDPOWER 2012 conference in June, the PTC was top of mind for the industry professionals. Karl Rove, former senior advisor to President George W. Bush, and Robert Gibbs, former press secretary and advisor to President Barack Obama, both agreed that Congress must extend the PTC. AWEA CEO Denise Bode previously called on Congress to act on an extension as early as possible in 2012. She later said, “Wind projects typically have an 18- to 24-month development cycle. So effectively, the PTC is already expiring.”

We’ve already seen the effects of the stalled legislation with installations put on hold, delayed projects and job cuts. The largest wind farm in the US – Terra-Gen Power’s 1,020-MW Alta Wind farm in Tehachapi, Calif. – announced it will not expand in 2013 without a PTC extension.

Members of Congress are showing their support for the credit, regardless of party affiliation.  And 18 House representatives sent a bipartisan letter to House leadership in June to petition for renewal of the PTC. The extension received support from Interior Secretary Ken Salazar and Energy Secretary Steve Chu, both of whom cited job uncertainty as a main reason for extension.

Does the PTC affect the global market?

Although a US problem at root, the PTC is not just a domestic issue. The overall wind market slowed its growth in 2012, although many in the industry are hopeful for a stronger 2013. Wind turbines have demonstrated their dependability to provide power, and enhanced energy storage alternatives like ultracapacitors increase the reliability of wind applications, so consistent energy is provided regardless of weather conditions. This has spurred adoption of wind energy over the last few years. The credit extension will be a deciding factor in whether domestic and global installations will reach the expected growth in 2013.

Although the US wind market is particularly finicky due to the stalled legislation, there are also global repercussions. For example, Chinese manufacturers are entwined with the PTC debate because their revenues are tied heavily to the outcome. During the last 18 to 24 months, Chinese manufacturers have slowed down their U.S. market penetration because of the PTC. Although they recognize the market potential in the U.S., their presence is minimal because U.S. firms are hesitant to increase installations until the market security is solidified.

How does the PTC affect job growth?

The national unemployment rate still hovers just over 8 percent. American manufacturing and clean energy technologies have great power in job creation and growth. Renewing the PTC is crucial to enabling this growth, as it could help the wind industry create up to 100,000 jobs by 2016. The US Department of Energy anticipates the extension would help create 500,000 jobs by 2030 and generate 20 percent of electricity in the U.S. The job creation possible extends from wind farm managers, turbine manufacturers, component suppliers and more. Political leaders recognize the enormous opportunity for domestic job growth and are vocal in announcing their support for the credit’s extension.

What will happen if it’s not extended?

One need only look to the past to predict the potential slump: although revived by Congress, the PTC has expired previously. After the most recent expiration in 2004, the U.S. experienced a 77 percent drop in new installations. The tax credit is influential in encouraging new wind installations, providing clean electricity and new jobs. It is important for Congress to act sooner rather than later.

Chad Hall (chall@ioxus.com) is founder and a vice president of sales at Ioxus, Inc., focusing on European sales. Previously, he spent 14 years with Custom Electronics, Inc. (CEI). His extensive mechanical engineering and business experience helped establish Ioxus from funding to factory to launch. 

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