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Wind sector welcomes US tax break extension

A reprieve for a wind power tax break by the US Congress has raised the sector’s outlook for 2013 while failing to clear uncertainty over long-term support.

By extending the Production Tax Credit (PTC), which pays wind farm owners 2.2 US cents/kWh, US lawmakers triggered a surge in wind power company shares, but industry figures stressed the continuing inconsistency of US policy.

Although the PTC’s continuation brightens wind power’s outlook, the industry in the US has already scaled down in expectation the tax break would end, Dr Gordon Edge, director of policy at RenewableUK, a trade association for wind and marine energy, told PEi.

“It [the PTC extension] will boost global confidence in the sector, with shares in key players such as Vestas and Gamesa already surging upwards,” he said.

“It’s also a salutary lesson in the dangers of stop-go politics, with some workers in the US being laid off while uncertainty was allowed to persist, until policy wasà‚ finally resolved.”

“Long-term clarity” on the financial framework will be similarly “crucial” for the UK as it finalises its far-reaching Electricity Market Reform, he added.

Vestas, whose shares jumped 13 per cent with the announcement, also tempered its welcome with regret at stop-start policies.

Michael Zarin, the turbine maker’s director for Global Media and External Relations, told PEi that the impact of extending the PTC for a year was unclear.

“There is uncertainty over how big an effect it will have,” he said

“It is unquestionably a good thing but it does come late and we do expect a significant reduction in firm orders in 2013 compared with previous years.”

Vestas has not raised its forecasts for 2013, already reduced in anticipation of the PTC’s expiry, he added.

“We still expect to deliver about 5 GW this year and to employ about 16,000 people by the end of 2013,” he told PEi.

Yet Roberta Gamble, Energy & Power Systems research director for Frost & Sullivan, told PEi that a failure to extend the PTC could have had “devastating” implications.

“The wind market would not have disappeared completely had the PTC lapsed since many states have Renewable Portfolio Standards (RFP) that require a portion of energy coming from renewable sources by 2020 or 2025, which are still short of being met. However, it would have had a devastating effect on the industry.”

In past years when the PTC was not extended, new wind installations and projects have fallen precipitously, she added.

“What was even more significant this time, as compared to previous times such as 2001 and 2003, was the fear that if the PTC lapsed at the end of 2012, it would not be renewed again as it had in past years,” she said.

“I believe this gives the industry more confidence in continued support of the wind industry from the federal government, which it needs to sustain market growth.”

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