Production tax credits

Production tax credits

April 10, 2010 | By Keith Martin in Washington, DC

Production tax credits for generating electricity from wind, geothermal and closed-loop biomass projects are 2.2¢ a kilowatt hour in 2010, the IRS said in April.

They had been 2.1¢ in 2009. The credits can be claimed on the electricity output from a project for 10 years after the project is originally placed in service.

Production tax credits for open-loop biomass, landfill gas, ocean energy and waste-to-energy projects will remain at 1.1¢ a kWh in 2010, the same rate as in 2009.

The tax credits are adjusted each year for inflation.

The credits will start to phase out if the average price at which electricity is sold under wholesale power contracts reaches 11.47¢ a kWh. The IRS said the average price for contracted electricity from wind is currently 4.22¢ a kWh. It did not try to calculate the prices for electricity from other renewables.

Developers have the option on renewable energy projects placed in service in 2010 or that start construction in 2010 to forego tax credits and receive a payment from the US Treasury for 30% of the project cost.

The IRS said tax credits for producing refined coal will be $6.27 a ton in 2010. “Refined coal” is coal that is less polluting than raw coal. It said the credits will start to phase out if raw coal prices reach 1.7 times the raw coal price in 2002, which, adjusted for inflation, was $45.75, so the phase out would not start until raw coal prices reach $77.77 a ton. The IRS said the 2010 reference price for raw coal is $54.74 a ton.