US spending bill benefits wind power development

US spending bill benefits wind power development

Wind farm in Altamont Pass, California. Photo credit: Shutterstock.com.

The US federal government's 2020 spending bill, signed by President Donald Trump in December, extends energy tax credits that will benefit the development of wind energy facilities, along with several other types of energy technologies such as solar, biodiesel, geothermal, and hydrokinetic. 

Wind energy developers who either spend 5 percent of project costs or begin facility construction in 2020 and come online by 2024 will be qualified for 60 percent of the 10-year, $25 per megawatt hour (i.e., $15/mwh) production tax credit (PTC) that was initiated in 2016 as a spur to development. 

If they prefer, they can instead elect to take a discounted investment tax credit (ITC) of 18 percent. Previously, the final round of projects eligible for either PTC or ITC had to have met qualifications in 2019 and be online by the end of 2023. 

According to the original rules, projects within the 2019-2023 range received a 40 percent PTC or a 12 percent ITC. Thus, the extension as written allows projects qualified in 2020 to receive a higher tax credit than those qualified in 2019. Strategies for working around this quirk are “likely available,” according to IHS Markit (IHSM), parent company of JOC.com, but they have not been made explicit. 

Extension expected to drive modest installation increase 

Before the extension, IHSM forecast that the PTC phaseout would lead US wind installations to drop from over 10 gigawatts in 2021 to less than 4 GW annually in 2023 and 2024. IHSM now expects the PTC extension to lower costs and increase onshore wind development slightly above the forecast in 2023 and by another GW in 2024. A large amount of wind capacity procured earlier, when the PTC was higher and projects due online in 2020 and 2021, will reduce investment in the mid-20s. 

Off the coast of the northeastern US, wind projects are expected to boom as states and utilities have shared plans and made commitments to build more than 26 GW of offshore projects by 2035. Project schedules have been delayed by environmental studies, however, threatening the ability of these projects to benefit from the ITC, preferable for these types of projects over the PTC because they are capital-intensive. IHSM expects the wind industry to lobby for a specifically offshore ITC separate from the onshore industry's ITC. Additionally, because solar power investments enjoy a permanent, 10 percent ITC that never phases out, the wind industry is expected to lobby for similar permanent support. 

Contact janet.nodar@ihsmarkit.com and follow her on Twitter: @janet_nodar.