Production Tax Credit and Investment Tax Credit for Wind
The Production Tax Credit (PTC) provides a 2.3¢ per kilowatt-hour tax credit for the first 10 years of electricity generation for utility-scale wind. The alternative Investment Tax Credit (ITC) (available as of 2013) provides a credit for 30% of investment costs at the start of the project and is especially significant for the offshore and distributed wind sectors because such projects are more capital-intensive and benefit from the up-front tax benefits. In December 2015, Congress passed extensions of the PTC and ITC.
As a result, the current wind energy PTC was extended through 2016. The credits will continue in 2017 at 80% of present value, in 2018 at 60%, and in 2019 at 40%. Wind projects will qualify if developers begin construction before the end of the designated period.
For small wind turbines, the credit is equal to 30% of expenditures, with no maximum credit for small wind turbines placed in service after December 31, 2008. Eligible small wind turbines are up to 100 kilowatts in capacity, and turbines must meet the performance and quality standards set forth by the American Wind Energy Association Small Wind Turbine Performance and Safety Standard 9.1-2009 or the International Electrotechnical Commission 61400-1, 61400-12, and 61400-11 (IEC).
Wind deployment cycles are influenced by extensions and periodic expirations of federal tax incentives. Historically the PTC has been an important driver of wind energy development, and legislators have frequently allowed it to lapse. This cyclical behavior creates challenges for wind developers, manufacturers, transmission planners, utility purchasers, and other stakeholders. The impact of this policy uncertainty was demonstrated in 2013. In that year, 1.1 gigawatts of new capacity were brought online without federal policy support, as compared to 13.1 gigawatts in 2012.