The wind production tax credit was extended by the U.S. Congress. According to the trade group- American Wind Association Energy, this extension saves 75,000 jobs in the US, which were expected to disappear, and allows new energy projects to emerge this year.
In August last year, in their attempt to prevent the “fiscal cliff,” the Senate Finance Committee proposed the extension along with other tax incentives that have been requested by the wind energy industry for years.
This tax allows wind energy to compete with cheap fossil fuel, by giving 2.2 cents per kilowatt hour for electricity produced by the turbines. In addition to this, the tax now can be claimed at the start of construction of the turbines, without waiting for their operation to begin.
As stated by the senior vice president in the leasing and asset finance division of Union Bank, a unit of Mitsubishi UFJ Financial Group, Lance Markowitz, this makes quite a massive difference and allows on-going projects to continue and finish off what they have started.
The tax, however, does not solve all problems of the wind power industry. The low power prices, as well as the competition from various other clean energy sources, still present a big challenge.
Because many world leading companies already expected the expiration of the tax credit, the industry still needs to recover from the decrease in last year’s order intake
Nevertheless, projects that have already begun will benefit greatly from the additional tax credit claim, making them very competitive with technologies such as biomass and geothermal, which still need investors.
According to Karl Gawell, executive director of the Geothermal Energy Association, this additional boost coming from the tax credit will divert around $4 billion from investments in geothermal projects.
The federal government is still to release the criteria that will define whether a project is “under construction.” Similar incentive was given before to solar power industries that incurred 5% of the total costs of the projects, regardless of whether construction has even begun. It is expected that the similar guidelines will apply, since the administration of Obama was very supportive of the idea.
In addition, it is expected that similar means to prevent the fiscal cliff from taking place would be used in the electric vehicle and electric motorcycles industries.