Project Finance Blog

GOP tax plan hurts US wind development forecasts

November 08, 2017

Posted in Blog article

Under current IRS rules, wind developers can claim the full amount of the federal production tax credit (PTC) through 2020 if they either started physical work of a significant nature or spent at least five percent of total project costs before the end of 2016. The date of beginning construction is irrelevant as long as construction is complete by 2020. As a result, a popular way to capture the credit is to have purchased turbines before the end of 2016. Developers can either begin construction immediately or warehouse the equipment.

The House Republicans’ plan proposed earlier this month would no  longer allow projects to qualify for the full credit unless they prove a continuous program of construction from the end of 2016 through completion. This effectively eliminates the four-year safe harbor and five percent spending provision. Additionally, the plan would cut the PTC for wind from $24 per megawatt-hour in 2017 to $15 per megawatt-hour.

The plan adds time pressure on wind developers, especially because the subsidy is already scheduled to phase out. Subsidy qualification would change the economic viability of certain projects.

If the plan were to become law, Bloomberg New Energy Finance projects that the US would add 19 gigawatts of new wind power through 2020. This is half of the 38 gigawatts BNEF projected before the plan was announced. Many wind-rich states that benefit from the current version of the PTC are represented by Republicans in Congress. This creates a stronger possibility that the proposal will face resistance. The plan is not yet final.


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