Wind energy producers in New Mexico had two bits of good news to ring in the New Year.
Congress gave a one-year extension to a production tax credit set to expire in January, as part of the American Taxpayer Relief Act. In addition, a little space is opening in the state production tax credit that’s been filled to its cap for a decade.
A production-tax credit gives energy producers a little money back on each kilowatt-hour of electricity produced. Similar to tax breaks for individual taxpayers, it is one of several credits for utility companies. Many such production tax credits have an annual cap on the total to reduce the overall fiscal impact on government revenues.
In New Mexico, the production tax credit was launched in 2003 and is capped at 2 million megawatt-hours per year for wind, solar and biomass combined, according to Louise Martinez, division director for the state Energy Conservation and Management Division. The production tax credit for solar energy can only make up 500,000 megawatt-hours of the total.
The first wind project using the state production tax credits – the New Mexico Wind Energy Center near Fort Sumner – will reach the end of its 10-year time limit on the credit in September. That will open up space for another utility to make back some cash on its energy produced by wind turbines. The New Mexico Wind Energy Center was able to collect up to $4 million a year, based on production, under the tax break over the last decade. The project next in line for the tax credit is Macho Springs, 20 miles northeast of Deming, Martinez said.
While the state tax credit may stay filled up, the extension of the federal tax credit means some wind energy projects under way or already operating in the state can still get money back on the electricity they produce. The federal wind energy production tax was extended as part of the tax package Congress passed to avoid a “fiscal cliff.” The production tax credit, good for a decade, was extended through 2013 by the Taxpayer Relief Act for projects that begin construction by the end of the year. Producers can earn 2 cents for every kilowatt-hour of energy produced.
If all the wind energy generation projects planned in 2012 are built out, wind capacity for the nation will be 12,000 megawatts, according to the U.S. Energy Information Administration. New Mexico currently has 700 megawatts of wind energy capacity, with another 316 megawatts ready to be built, according to Brian Johnson, the state’s Bureau Chief of Energy Technology and Engineering.
Johnson noted the growth of wind and solar have been exponential in the last two decades, but there’s room for plenty of more systems in the state.
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