Congress has passed a short-term extension of the lapsed Production Tax Credit (PTC) for wind power installations, but the extension as written probably won’t stimulate a major round of new wind projects, according to the Energy Information Administration (EIA).
EIA posted a wind power overview Dec. 18 that says a lot of wind power additions will be carried out in the final quarter of 2014, but merely extending the PTC through the end of 2014 probably won’t spur much additional wind generation.
“Capacity additions in the first three quarters of 2014 have totaled less than 2 GW, but project developers have reported to EIA an additional 3 GW of expected capacity additions for the fourth quarter,” EIA said in the analysis.
“They have also reported to EIA an additional 11 GW of wind projects with expected completion dates in 2015, primarily in states such as Texas, Oklahoma, Illinois, Iowa, and Minnesota,” EIA said.
The last Energy Infrastructure Update from the Federal Energy Regulatory Commission (FERC) showed a significant amount of wind power was brought online in October. The FERC data showed that 574 MW of wind generation was commissioned during October.
For the first 10 months of 2014, 2,189 MW of new wind power has been brought online, according to FERC. By contrast, only 1,031 MW of new wind power was installed during the first 10 months of 2013, according to the FERC data.
On Dec. 16, the Senate approved a bill (already passed by the House of Representatives on Dec. 3) that retroactively extends the federal PTC for wind plants, which had previously expired at the end of 2013. However, because of timing, this extension is unlikely to spur significant additional wind development activity beyond what installers had already planned.
The PTC allows eligible wind units to take an inflation-adjusted tax credit per unit of generation for the first 10 years of operation. This credit amounted to 2.3 cents per kilowatthour (KWh) in 2014.
Previously, the PTC had been extended on an incremental, short-term basis and had been allowed to lapse or nearly lapse on several occasions. Before 2013, the tax credit legislation specified that projects must be in service by the end of the year. The 2013 and 2014 extensions were different, as they required that projects must have been under construction by the end of the year, EIA noted in its analysis.
Projects could meet the construction deadline by either starting physical work or through the safe harbor clause, which required them to spend at least 5% of the project cost prior to the end of 2013 and maintain continuous progress thereafter. Under the 2013 extension and subsequent IRS guidance, wind projects attempting to qualify for the PTC through this safe harbor provision had an incentive to enter service prior to the end of 2015 in order to ensure PTC eligibility.
The change in eligibility requirements and the timing of the 2013 extension (the deadline wasn’t extended past 2012 until the beginning of 2013) contributed to wind capacity additions falling from an all-time high of 13 gigawatts (GW) in 2012 to less than 1 GW in 2013, EIA said.