Wind energy tax breaks win as House passes ‘fiscal cliff’ tax package

Wind energy producers can breathe a collective sigh of relief after Congress extended  renewable energy tax credits  as part of the fiscal cliff legislation.

Lawmakers extended for another year the  renewable energy production tax credit that  expired at the end of 2012.   The fiscal cliff legislation averted  automatic tax increases and spending cuts that analysts and politicians feared could send the U.S. into a recession.

“Now we can continue to provide America with more clean, affordable, homegrown energy, and keep growing a new manufacturing sector that’s now making nearly 70 percent of our wind turbines in the U.S.A.,” said Rob Gramlich, the interim CEO of the American Wind Energy Association.

The tax credit would cover a range of renewable energy projects, including wind, that begin construction in 2013, rather than just projects that are operational by the deadline, an additional win for the industry. President Barack Obama is expected to  sign the legislation.

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Wind energy construction projects made up 44 percent of all new electricity generation capacity in 2012, according to the American Wind Energy Association. However, fear of the expiration of the tax credit has caused a slowdown in projects for 2013.

Since the tax credit was first passed in 1992 as part of the Energy Policy Act, the renewable tax production credit has helped encourage the development of wind and other renewable energy for two decades.  Since that time, the production credit has been periodically extended through tax legislation, most recently through the American Recovery and Reinvestment Act of 2009.

The production tax credit gives wind developers a 2.2 cent tax break for every kilowatt hour of energy produced for the first ten years of a facility’s life, on the condition that it is sold to an unrelated party. Any unused credits may be carried forward for up to 20 years following generation.

Industry representatives say the production credit has been a key driver for the wind industry’s investment in research and development. The American Wind Energy Association estimates that it takes about 18 to 24 months to build a wind project, and the group has lobbied hard for an extension of the tax credit, saying that it will be much harder to build new wind projects without it.

The United States is second only to China in its wind production, with nearly 52,000 megawatts of installed wind capacity. Wind energy currently makes up a little more than three percent of all U.S. electricity production, according to the Department of Energy.