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The Production Tax Credit is Key to a Strong U.S. Wind Industry

April 10, 2014 - 2:00pm

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A new report by the Energy Department’s National Renewable Energy Laboratory analyzes the effects the production tax credit (PTC) could have on the continued growth of wind power and, in turn, on the domestic wind energy manufacturing industry. The report notes that the PTC has been critical to the development of the wind power industry and the deployment of wind generation in the United States. From 2006 to 2012, wind power capacity has grown at an average annual rate of approximately 30 percent and the costs of new installed wind have dropped by 22 percent. At the same time, domestic manufacturers are now supplying more than 70 percent of equipment installed at U.S. wind farms -- up from just 25 percent in 2006. In 2012, the industry also supported approximately 80,000 jobs up and down the supply chain and in nearly every state.

The PTC works by providing a tax credit for every unit of energy produced by a qualifying facility for the first 10 years of commercial operation. The credit enables wind developers to sell wind electricity at a lower price to power purchasers, ultimately reducing the cost of clean, renewable electricity for U.S. consumers.

The study, Implications of a PTC Extension on U.S. Wind Deployment, finds:

  • Under a scenario in which the production tax credit is not extended and all other policies remain unchanged -- and in which, as anticipated, there is little to no growth for electricity in the U.S. -- wind capacity additions are projected to fall to between 3 gigawatts (GW) and 5 GW per year from 2013 through 2020. This compares to average additions of 8.7 GW per year from 2008 through 2012.
  • Reduced domestic wind power deployment is likely to have a direct and negative effect on U.S.-based wind turbine manufacturing production and employment.
  • Production tax credit extension options that would ramp down and end by 2022 appear to be insufficient to support recent levels of deployment.
  • Of the scenarios considered in the report, extending the production tax credit at its historical level could provide the best opportunity to sustain strong U.S. wind energy installation and domestic manufacturing.

Wind power has been a rapidly growing part of U.S. electricity supply and is one of the fastest growing parts of the U.S. economy, creating jobs while also helping build a clean energy future. As of 2012, the U.S. wind industry had an estimated 550 manufacturing facilities producing turbines, blades, towers and their components. Through 2012, more than 60 GW of land-based wind generation capacity have been installed nationally. It is clear that wind energy is a proven technology that is growing -- totaling 43 percent of the new electricity generation capacity in 2012.

The success of the U.S. wind industry demonstrates the far-reaching benefits that tax credits can have in creating jobs, boosting U.S. competitiveness and building a more sustainable, clean energy future.

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