Late last night, President Obama officially signed into law legislation to avoid the “fiscal cliff.” The adoption of this measure, which was approved overwhelmingly by the Senate and by a vote of 257 to 167 in the House of Representatives, is excellent news for advocates of renewable energy, as it includes an extension of the vitally important Production Tax Credit for wind facilities.
There has been some confusion by the various media outlets covering the PTC over exactly how much additional time this extension buys for wind developers. Prior to this fiscal cliff deal, IRC 45(d) (the section of the Internal Revenue Code setting forth the PTC) stated that qualifying wind facilities had to be placed in service before January 1, 2013, meaning that the projects have to be fully constructed and capable of generating energy. Over the last few months, this requirement has forced many developers to aggresively ensure that their projects were placed in service by Monday, December 31st. With the new deal, this provision has been amended by replacing the deadline of “before January 1, 2013” with “the construction of which begins before January 1, 2014.” Thus, as amended, IRC 45(d) will read in pertinent part as follows:
In the case of a facility using wind to produce electricity, the term “qualified facility” means any facility owned by the taxpayer which is originally placed in service after December 31, 1993, and the construction of which begins before January 1, 2014.
Thus, effectively, the extension grants wind project developers another year to design, procure equipment, and break ground on new projects.
It is important to note that this is more time than might have been granted had the legislation followed the current statutory language and required the projects to be placed in service by December 31, 2013. Such a measure would have been significantly more onerous on the industry, as wind projects typically require more than a year to engineer, acquire the necessary land rights, locate potential offtakers for the power generated, and complete construction.
This is certainly excellent news for renewable developers across the country, and credit should be given to all of the lawmakers who fought for this vital incentive to be included as part of the fiscal cliff package. A special thanks should be extended to President Obama for his insistence that the wind PTC be included in any final deal.
If you have any questions or comments about the Production Tax Credit or the wind industry, please feel free to leave a comment below or contact me directly at email@example.com or (913)234-7416.