A Big Boost for Clean Energy

America’s drive toward a clean energy future got a big boost this week after Congress renewed two key tax incentives for renewable electricity—the Production Tax Credit (PTC) and the Investment Tax Credit (ITC).  The decision to extend these incentive programs provides renewable energy developers with much-needed certainty that financial support will continue to be available over the next five years.

Tax credits have helped American wind power expand rapidly since the turn of the century.  In 2014, the U.S. generated 26 times more electricity from wind power than it did in 2001. Wind energy now accounts for over 4.4 percent of nationwide electricity generation.  Nine states generated more than 12 percent of their total electricity power from the wind in 2014.  According to the American Wind Energy Association, the industry currently employs more than 73,000 people, with a manufacturing supply chain of more than 500 factories across 43 states.

The PTC and the ITC support the growth of wind power by providing developers with a consistent source of financial support. At its current level, the PTC provides utility-scale wind energy producers with a tax credit of 2.3 cents per kilowatt hour for electricity generated during the first 10 years of a wind farm’s operation. The alternative ITC, a credit currently equal to 30 percent of a facility’s construction costs, is particularly useful for offsetting the capital costs of early stage tech­nologies such as offshore wind.

As described in our recent report, Turning to the Wind, policy support for clean, renewable sources of energy such as wind delivers significant environmental benefits.  The integration of wind power into the American electric grid significantly reduces global warming pollution by generating energy that would have otherwise been produced through the burning of fossil fuels. The 182 million megawatt-hours of electricity generated from wind power in 2014 alone effectively averted an estimated 143 million metric tons of carbon dioxide– as much as would be produced by 37 typi­cal coal-fired power plants over a year.

The five-year extension of the PTC and the ITC for wind energy is a welcome change from on-again, off-again approach that has characterized these programs over the past two decades. The uncertainty created by the uneven and unpredictable application of these policies has severely undermined investor confidence and disrupted wind energy development.  For example, after the tax credits were allowed to expire at the end of 2012, installations of new wind farms fell 92 percent, causing a loss of 30,000 jobs across the industry in 2013. Once Congress renewed the PTC, the U.S. wind energy industry added 23,000 jobs the following year.  While the level of financing support will decrease between 2017 and 2020, the certainty that the five-year plan provides to investors and developers is extremely valuable.

With continued wind energy growth, prices will continue to decline and technology will improve, allowing for cheaper, more efficient wind turbines to be built.  The exciting addition of offshore wind in Rhode Island, and other Atlantic states will further allow wind energy development to progress.  With continued policy support for wind energy, America can meet and exceed the targets set by the Clean Power Plan, and move forward on a path to 100 percent renewable energy by 2050, benefiting both the economy and the environment.