Production tax credit: Difference between revisions
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[[File:PTC expiration vs wind installation.png|thumb]] | [[File:PTC expiration vs wind installation.png|thumb]] | ||
In the USA, a “production tax credit” (PTC) for industrial wind turbines was established in 1992<ref>https://www.wind-watch.org/documents/enrons-ken-lay-asks-for-texas-gov-bushs-help-in-securing-tax-credits-for-wind/</ref><ref>https://programs.dsireusa.org/system/program/detail/734</ref> and first applied to facilities built in 1993. It provided a tax credit to a facility for 10 years of 1.5 cents per kWh of electricity generated. Every year it is adjusted for inflation, e.g., to 2. | In the USA, a “production tax credit” (PTC) for industrial wind turbines was established in 1992<ref>https://www.wind-watch.org/documents/enrons-ken-lay-asks-for-texas-gov-bushs-help-in-securing-tax-credits-for-wind/</ref><ref>https://programs.dsireusa.org/system/program/detail/734</ref> and first applied to facilities built in 1993. It provided a tax credit to a facility for 10 years of 1.5 cents per kWh of electricity generated. Every year it is adjusted for inflation, e.g., to 2.6 cents in 2018. | ||
After the initial legislation expired after 1999, the PTC was allowed to lapse for a year, as it was again after 2001 and 2003. As the wind industry lobby has noted, wind development dropped precipitously in years when the PTC was not available to help energy companies avoid taxes.<ref>American Wind Energy Association. 2015. “Wind Energy and the PTC”.</ref><ref>https://docs.wind-watch.org/schleede-big-money.pdf</ref> | After the initial legislation expired after 1999, the PTC was allowed to lapse for a year, as it was again after 2001 and 2003. As the wind industry lobby has noted, wind development dropped precipitously in years when the PTC was not available to help energy companies avoid taxes.<ref>American Wind Energy Association. 2015. “Wind Energy and the PTC”.</ref><ref>https://docs.wind-watch.org/schleede-big-money.pdf</ref> | ||
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In December 2020, Congress extended the PTC and ITC – at the 2018 rate – for onshore projects starting construction in 2021. | In December 2020, Congress extended the PTC and ITC – at the 2018 rate – for onshore projects starting construction in 2021. | ||
In August 2022, they were similarly extended for onshore projects starting construction before January 1, 2025.<ref>https://www.congress.gov/bill/117th-congress/house-bill/5376/text</ref> The 2018 rate was reduced to one-fifth, however, unless a project pays prevailing wages and hires a certain number of apprentices (at least 1 if 4 or more employees, then 10% in 2022, 12.5% in 2023, and then 15%). A further 10% credit (20% for offshore) can be claimed if all of the components and their materials are produced in the USA (unless that would increase the cost more than 25% or they are not available in sufficient quantity or quality). A further 10% credit is available for projects in brownfields or areas with at least 0.17% employment in or 25% of tax revenues from coal, oil, or natural gas and with unemployment at or above the national average or a closed coal mine or power plant (since 2000 or 2010, respectively). | |||
==Investment tax credit== | ==Investment tax credit== | ||
As an alternative, facilities eligible for the PTC can claim an “investment tax credit” (ITC), in which a projected value of the PTC over its 10 years (namely, 30% of the capital investment) is taken up front.<ref>http://programs.dsireusa.org/system/program/detail/658</ref> | As an alternative, facilities eligible for the PTC can claim an “investment tax credit” (ITC), in which a projected value of the PTC over its 10 years (namely, 30% of the capital investment) is taken up front.<ref>http://programs.dsireusa.org/system/program/detail/658</ref> | ||
==References== | ==References== | ||