PTC inflation adjustments

PTC inflation adjustments

June 16, 2020 | By Keith Martin in Washington, DC

Production tax credits for wind and geothermal projects will remain at the same level as in 2019.

They will increase slightly for landfill gas, biomass and other renewable energy projects.

Credits for producing refined coal are also increasing.

Production tax credits for generating electricity from wind, geothermal steam or fluid or closed-loop biomass (plants grown to be used as fuel in power plants) will remain 2.5¢ a kilowatt hour in 2020, the same amount as in 2019. They will increase to 1.3¢ a kilowatt hour for generating electricity from open-loop biomass, landfill gas, incremental hydropower and ocean energy.

The credits are adjusted each year for inflation as measured by the GDP price deflator. They run for 10 years after a project is originally placed in service.

The credits phase out if contracted electricity prices from a particular resource reach a certain level. That level for wind in 2020 is 13.3496¢ a KWh. The IRS said there will not be any phase out in 2020 because contracted wind electricity prices are 4.16¢ a KWh going into 2020. It said it lacks data on contracted prices for electricity from the other energy sources.

Production tax credits for producing refined coal are $7.301 a ton in 2020. Refined coal is coal that has been treated with chemicals to make it less polluting than regular coal. The IRS said there will not be any phase out of refined coal credits in 2020. The refined coal credit phases out as the reference price for raw coal moves above 1.7 times the 2002 price of raw coal. The 2020 reference price is $48.58 a ton. A phase out would have started at $90.49 a ton.

The tax credit amounts are in IRS Notice 2020-38. The notice appeared in the IRS Cumulative Bulletin on June 1.