The American wind energy industry has grown in spite of the “boom and bust” cycle of wind energy development fostered by the renewal-expiration-renewal cycle of the wind production tax credit (PTC). The PTC is one of the primary tools used to spur wind energy development and expired at the end of 2013. The result was a 92% drop in 2013 installations, compared to 2012. Extension of the PTC will likely be the subject of debate about so-called tax extenders during the upcoming “lame duck” session of Congress as the wind industry seeks an extension of the PTC through 2015.
The American solar energy industry has been better off, given the longer time frame the industry earned with the eight-year extension of the Solar Investment Tax Credit (ITC) in 2008. However, that credit will drop from the current rate of 30 percent to 10 percent after December 31, 2016. The solar industry is advocating revision of the credit qualification terms for the ITC from the current standard that states a project must “begin operation” by the deadline, to a requirement that states a project must “begin construction” by the deadline.
While opponents of these credits point to the cost an extension would have on federal tax revenue, it is hard to argue with the dramatic success the credits have had in growing both the wind and solar industries. If federal tax revenue is a concern, it seems harder still to justify the bigger tax credits currently available to the far more mature and profitable fossil fuel industries.
It is entirely possible that the combined pressure of the renewables industry will successfully secure passage of some sort of tax extender legislation. But it’s not likely that whatever extensions are secured will be long-term. Conversations about what comes next after tax credits have been taking place for years, and the next few months will likely bring them back to the fore again.
Is this the end of the line for renewable energy tax credits? Should it be? What impact does the cycle of renewal-expiration-renewal have on the efficacy of these credits?