When Congress approved a last-minute deal this week to avoid toppling off the fiscal cliff, it also extended a tax break that could provide financial benefits to a controversial $250 million wind farm in Champaign County.
Proponents of the tax credit said it will provide needed stability in the energy market, while opponents described it as a wasteful handout to the wind industry.
A one-year extension of the federal Production Tax Credit, or PTC, was included in the final bill approved by Congress earlier this week to avoid the fiscal cliff. It gives wind farms an income tax credit of 2.2 cents per kilowatt hour for electricity produced by utility scale wind turbines.
Members of the Ohio Power Siting Board are reviewing a proposal for the $250 million second phase of the Buckeye Wind Project. An earlier phase has already been approved, and together the projects would build as many as 100 turbines in Champaign County. The tax credit extension provides financial stability for both phases moving forward, said Jason Dagger, project developer.
“It’s a good thing for the project,” Dagger said. “It gives us a little more certainty for the next year for the project.”
Proponents of the Buckeye Project have said it will bring needed tax revenue and jobs to the local economy, but some residents have raised concerns that the turbines will be too close to area homes and could be noisy and unsafe.
The tax credit would have expired on Dec. 31 if an extension had not been approved. Nationwide, its demise could have cost as many as 37,000 jobs in the wind industry, according to information from the American Wind Energy Association. Overall, the wind industry supports about 75,000 jobs in the U.S., according to AWEA.
Although it’s only a one-year extension, the legislation effectively grants tax benefits to projects built within the next two years because projects simply have to begin construction in 2013 to qualify. Previously, the tax credit was only granted to turbines that had been built and were operating by the deadline, said Lisa Linowes, executive director of the Industrial Wind Action Group.
The Buckeye Wind Project, which is expected to begin construction in late 2013, would likely qualify for the tax credit under the new rules. Access roads and turbine foundations could be under construction by the end of the year, but it is unlikely the turbines will be producing energy in 2013, Dagger said.
The Champaign County project likely would have moved forward even without the PTC, Dagger said, but now developers will have one less issue to worry about as they move ahead with other items such as selecting a turbine and hiring a contractor.
The PTC could cost taxpayers as much as $12 billion over the next decade, Linowes said, and opponents were optimistic it would be allowed to expire. She argued most wind farms would still be able to operate without the PTC by lowering manufacturing and other costs. But she said the tax credit artificially props up some poorly designed projects that would not be profitable otherwise.
“It was also way too generous,” Linowes said.
But the wind industry was already losing jobs in 2012 as the tax credit waited for approval, said Lindsay North, a spokeswoman for the AWEA.
“The industry did already lose jobs across the spectrum, including manufacturing jobs due to the uncertainty in 2012,” North said. “With the new extension in place, however, the industry can proceed with the development process of pursuing power purchase agreements, raising capital, placing orders for turbines, activating the supply chain, and construction, all of which create and maintain jobs.”
Although the PTC was extended, opponents said the fact that it was approved at the final hour is in indication that legislators were more skeptical of its worth. The PTC can still be amended, Linowes said. Possible changes could mean the PTC is only granted to projects in states that do not already require energy companies to purchase electricity from renewable sources. Lawmakers also could amend the tax credit so it would not be granted to projects that produce most of their energy in the evening, when there is less demand on the grid, Linowes said.
Locally, it is also still not clear the Buckeye Wind Project will be under construction in time to receive the PTC, said Julia Johnson, a member of Union Neighbors United, a group opposed to the project. The project’s second phase is still under review by the Ohio Power Siting Board, and opponents can still challenge the project in the Ohio Supreme Court if it is approved, Johnson said.
“There are still a lot of things that could impact the project,” Johnson said.
Across the U.S. however, the extension will allow numerous projects to move forward, North said.
“While development activity, including starting construction, for projects in 2013 and beyond was halted due to the uncertainty around the PTC- now with clarity in place, the development activity will be re-activated and projects can move toward starting construction,” North said.
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