Renewable Energy Production Tax Credit and Investment Tax Credit

If America were to take advantage of just a fraction of its wind energy potential to get 30 percent of its electricity from the wind by 2030, the nation could cut carbon emissions from power plants to 40 percent below 2005 levels. That much pollution-free energy would help states meet and exceed the emission reductions called for by the Environmental Protection Agency’s Clean Power Plan, and help the nation meet its commitment to cut U.S. carbon pollution by 32 percent by 2030. To ensure that wind power is a central component of the Clean Power Plan, strong federal incentives are needed to help drive this clean, renewable energy. 

Renewable Energy Production Tax Credit and Investment Tax Credit 

If America were to take advantage of just a fraction of its wind energy potential to get 30 percent of its electricity from the wind by 2030, the nation could cut carbon emissions from power plants to 40 percent below 2005 levels. That much pollution-free energy would help states meet and exceed the emission reductions called for by the Environmental Protection Agency’s Clean Power Plan, and help the nation meet its commitment to cut U.S. carbon pollution by 32 percent by 2030. To ensure that wind power is a central component of the Clean Power Plan, strong federal incentives are needed to help drive this clean, renewable energy.

Renewable Energy Production Tax Credit (PTC): provided a 2.3¢/ kWh tax credit for the first 10 years of electricity production. 

Investment Tax Credit (ITC): Can be used in lieu of the PTC and provided a credit of 30% of the investment costs, which is particularly important for offshore wind projects that are typically more capital intensive than land-based wind.

Federal incentives such as the PTC and ITC have been two of the most important tools in growing onshore and offshore wind:

  • The PTC and the ITC have driven wind development in the United States, allowing for the installation of enough wind capacity to power the equivalent of 15.5 million homes.[1]
  • Between 2008 and 2012, the PTC and the ITC were able to help decrease the price of wind by 43%.[2]

The PTC and ITC have historically been extended in one and two year blocks, which has led to a lot of uncertainty for the wind industry and has hampered the steady development of wind power.

  • In 2012, the uncertainty about whether Congress would act to extend the incentives led to a 92 percent drop in in wind installations during 2013, as seen in the graph.[3]       The “boom-and-bust” cycle of wind development are the direct result of short-term extensions or expiration of the PTC and ITC. 
  • In 2014, Congress voted in the final two weeks of the year to extend the PTC and ITC retroactively for the year. Currently, the PTC and ITC have yet to be extended by Congress and have been expired since the end of 2014.

[1] American Wind Energy Association, “Federal wind energy policy,” AWEA, http://www.awea.org/Advocacy/Content.aspx?ItemNumber=791&navItemNumber=580

[2] American Wind Energy Association, “Federal wind energy policy,” AWEA, http://www.awea.org/Advocacy/Content.aspx?ItemNumber=791&navItemNumber=580

[3] American Wind Energy Association, “Federal production tax credit for wind energy,” AWEA,

http://www.awea.org/Advocacy/Content.aspx?ItemNumber=797&navItemNumber=655

 

Authors

Luke Metzger

Executive Director, Environment Texas

As the executive director of Environment Texas, Luke is a leading voice in the state for clean air and water, parks and wildlife, and a livable climate. Luke recently led the successful campaign to get the Texas Legislature and voters to invest $1 billion to buy land for new state parks. He also helped win permanent protection for the Christmas Mountains of Big Bend; helped compel Exxon, Shell and Chevron Phillips to cut air pollution at four Texas refineries and chemical plants; and got the Austin and Houston school districts to install filters on water fountains to protect children from lead in drinking water. The San Antonio Current has called Luke "long one of the most energetic and dedicated defenders of environmental issues in the state." He has been named one of the "Top Lobbyists for Causes" by Capitol Inside, received the President's Award from the Texas Recreation and Parks Society for his work to protect Texas parks. He is a board member of the Clean Air Force of Central Texas and an advisory board member of the Texas Tech University Masters of Public Administration program. Luke, his wife, son and daughters are working to visit every state park in Texas.