Fickle Like the Wind: The Boom-and-Bust Cycle of the Renewable Energy Tax Credit

The Production Tax Credit may not be America's best policy tool for incentivizing clean energy development, but it's what we've got -- and it must be renewed
Nov 18, 2011 2:19 PM ET
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Posted by Reynard Loki

There are three letters on the minds of those in America's renewable energy sector: PTC. The acronym stands for Production Tax Credit, a critical tax incentive that is set to expire in 2012 unless Congress takes action. Considering the PTC's on-again, off-again status over the years -- and that on matters concerning clean energy investments, Congressional Republicans seem more focused on investigating the loan guarantees issued to the solar manufacturer Solyndra, which went bankrupt in September -- the proponents of renewable energy are rightfully concerned.

The PTC is the main financial assistance vehicle that renewable energy investors and developers receive from the federal government, amounting to 2.2 cents per kWh over the first 10-year period that an approved facility is in operation. The wind industry in particular relies heavily on this credit, which has been critical in driving the sector's growth over the past seven years.[1] IHS Emerging Energy Research, an independent advisory firm based in Cambridge, Massachusetts, says that without the PTC, wind installations could plummet from a forecasted annual peak of 10.5 GW in 2012 to 1.5 GW in 2013.[2]


On November 2, representatives Dave Reichert (R-Wash.) and Earl Blumenauer (D-Ore.) introduced the bill H.R. 3307, The American Renewable Energy Production Tax Credit Extension Act of 2011, to extend the PTC.[3] But even though it has bipartisan support and would extend the federal tax credit through 2016 for installations of wind, solar and hydro, its fate is unclear. The credit has been in existence in various forms since the Energy Policy Act of 1992, but Congress has regularly flip-flopped between renewing and retiring it.

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Reynard is a Justmeans staff writer for Sustainable Finance and Corporate Social Responsibility. A former media executive with 15 years experience in the private and non-profit sectors, Reynard is the co-founder of MomenTech, a New York-based experimental production studio that explores transnational progressivism, neo-nomadism, post-humanism and futurism. He is also author of the blog 13.7 Billion Years, covering cosmology, biodiversity, animal welfare, conservation and ethical consumption. He is currently developing the Underground Desert Living Unit (UDLU), a sustainable single-family dwelling envisioned as a potential adaptation response to the future loss of human habitat due to the effects of anthropogenic climate change.