The federal production tax credit (“PTC”) is set to expire at the end of this year. Recently, Congress refused to extend the PTC in the latest version payroll tax bill.
What is the the tax credit and why should you care? More importantly, has the federal tax credit help to create jobs in Pennsylvania?
Ten years ago Pennsylvania had no wind industry. No wind farms, no turbine manufacturing, no clean energy portfolio. What green energy we possessed, i.e. hydro on the Susquehanna River, we mostly exported.
Despite resistance from traditional and entrenched fossil fuel interests, Pennsylvania has created a substantial stake in this nascent industry. Wind technology is creating jobs and energy at a record pace, and leaves no dark legacy behind to curse future generations.
The PTC has been a potent tool to promote wind energy development
in Pennsylvania by providing the certainty that allowed us to fund wind farm development and execute Power Purchase Agreements (“PPA”) with electric utilities.
How does it work? The tax credit incentivizes energy generators by providing a 2.2-cent per kilowatt hour tax credit for the first 10 years of a wind farm’s operation. This certainty allowed traditional utilities to enter into PPA’s with emerging wind generators which are at a competitive disadvantage to rate payer subsidized coal and nuclear plants.
The PTC is about investing in home grown energy and technology. The American wind industry is maturing, but we are also competing against state sponsored challenges from China, Denmark, Germany and Spain.
The wind industry accounted for 35% of all new U.S. power capacity in the last five years. In 2008, DOE’s National Renewable Technology Laboratory predicted wind could account for 20% of American electric generation by 2030 via onshore and offshore production.
We have bled manufacturing jobs in Pennsylvania. In 1998 the Commonwealth had 873,700 manufacturing jobs, but from 1999-2009 we lost 229,500 manufacturing jobs.
One of the most significant contributors to retooling our long-term manufacturing base has been the wind industry. During that same period, Pennsylvania’s wind farms and turbine manufacturers emerged and now support almost 5,000 long-term jobs. The Commonwealth is a base of operations for 15 plants that manufacture components for the wind industry.
Pennsylvania wind farms produce 751 megawatts of wind energy and an additional 177 megawatts under construction. This industry pays more then $1.3 million in annual tax payments, and another $2.2 million in land lease agreements.
In order to maintain certainty and create the ability to execute Power Purchase Agreements, we need a level playing field, private equity and the production tax credit.
The EIA reported in December, 2011 that the wind industry grew nationally by 24% between 2010 and 2011 in. This year projected growth is is 9.4% prior to the expiration of the PTC.
The tax credit is a vital economic element of our nation’s recovery.
Without a long-term policy, manufacturers and investors are discouraged from investing in additional wind projects, uprating existing stations or expanding wind manufacturing facilities.
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