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The Production Tax Credit: Getting More Credit Than It's Due?

State government may have done more for wind power than PTC ever did.
Fortnightly Magazine - May 15 2002

solar, and geothermal. According to the National Renewable Energy Laboratory (NREL), as of January 2002, a total of 650 MW of new renewable energy capacity has been installed as a result of utility and competitive green pricing programs, with another 440 MW likely to be installed within the next year. Of this total, 604 MW, or 93 percent is wind energy, 27.4 MW (4 percent) is biomass, 11.5 MW (1.7 percent) is small hydroelectric, 5 MW (0.7 percent) is geothermal, 4.2 MW (0.6 percent) is solar energy, and 1.6 MW (0.2 percent) is landfill gas.

Wind Related Terms:
A Quick Reference


Green power programs
provide market-based choices for electricity consumers to purchase power generated from renewable energy technologies (including wind, solar, geothermal, hydroelectric, and various forms of biomass) rather than conventional fossil fuel-based power generation. Green power programs are currently offered in both regulated and deregulated markets in 23 states, 18 that also have installed wind capacity.

Renewable Portfolio Standards require that a certain percentage of a utility's overall or new generating capacity or energy sales must be derived from renewable resources. Currently, 13 states have enacted RPS mandates, 8 of which also have some level of installed wind capacity.

State provided investment tax exemptions lower the cost of investment in wind and other forms of renewable energy by allowing the buyer to deduct a portion of the cost from their taxes. Currently, 19 states have some form of corporate investment tax exemption for renewable energy, ten of which actually have some wind power capacity installed.

Low cost loans provide investors in wind or other renewable energy low interest or no interest loans with favorable repayment terms. Utilities often use low-cost loans for renewable energy as a demand-side management strategy. Low-cost loan programs for renewable energy are available in 15 states, 10 of which also have some wind capacity installed.

The premium consumers pay for purchasing green power varies from supplier to supplier, ranging from 0.6 to 5.0 cents per kWh. In terms of customer participation, Moorhead Public Service of Minnesota has the highest participation rate with 7 percent of its customers signed up. For total renewable power capacity, Austin Energy of Texas is first with 76.9 MW of wind and solar power installed, and other forms of renewable energy to be added to the program soon.

This is not to say that the PTC has not provided some positive stimulus to the industry, or that extending it will not contribute to continued growth in wind power in the United States. On the contrary, it is likely to be more effective now than it was in the 1990s. With more states opening electricity markets to retail and wholesale competition over the last five years, it has become much clearer that the demand of electric generating capacity is very elastic. Investors are very sensitive to the price of generating technologies. The reason the PTC was unable to stimulate significant growth in wind power investments early on may have been because the cost of investment was simply too high, even with the tax credit