Wind developers rush to get project in the pipeline before federal tax credits end in 2020
Energize Weekly, May 22, 2019
Wind farm projects are forecast to swell in 2019 as developers look to get their projects in the pipeline before federal tax credits vanish, according to the federal Energy Information Administration (EIA).
The EIA is projecting that wind projects will double over 2017 to 12.7 gigawatts (GW) of capacity in 2018, making the second biggest year on record.
The record of 13.3 GW was set in 2012 when the wind Production Tax Credit (PTC) was set to expire. The program provides for a tax credit for every kilowatt-hour (kWh) of electricity generations during its first 10 years of operation.
The PTC was later renewed, but as part of a Congressional budget deal in 2016, the value of the credit was progressively cut before expiring in 2020. Facilities built after Dec. 31, 2019, will not be able to claim the PTC.
Prior to January 2018, the 30 percent credit was worth about 2.3 cents a kWh. Since then, the value of the credit has been stepped down 20 percent with 2019 providing a 60 percent cut to the original credit.
“The high level of annual capacity additions in 2012 was driven by developers scheduling project completion in time to qualify for the PTC,” the EIA said. “Similarly, the increase in annual capacity additions for wind scheduled for 2019 is largely being driven by the legislated phase-out of the PTC extension for wind.”
To be eligible for the credit, a developer has to begin operations in 2019 or demonstrate that 5 percent of the total capital cost of the project has been spent.
The 5 percent down payment is called “safe harboring” and gives a developer up to four calendar years to complete the project.
Since 2019 makes four years since the 2016 agreement, developers who want to receive the full PTC credit must begin operations this year.
“EIA expects wind facilities to push to complete construction by the end of the year to ensure operations begin as required by the PTC legislation,” the agency said.
The push to get the full PTC is a major, but not the sole, reason that a large number of wind projects are projected to come online in December—nearly 45 percent of the year’s total or 5.7 GW. December has consistently been a month where a large portion of the year’s capacity comes on line, the EIA said.
EIA’s forecast is based on projects reported to the agency through surveys used in the agency’s Preliminary Monthly Electric Generation Inventory.