Insight

The U.S. Wind Energy Production Tax Credit – time for a change

16 July 2015

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16 July 2015

The U.S. Wind Energy Production Tax Credit – time for a change

Report summary

The wind energy Production Tax Credit (PTC) has driven expansive development of wind power in the United States. However, more recently the PTC has skewed wind deployment into areas that probably didn’t need it, while shortchanging other areas. In some areas excess wind power is disrupting power markets. With tax policy support scheduled to decline for both the wind and solar industries, a reasonable joint extension policy should recognize that they do not need perpetual support.

Key Takeaways
Introduction
Historical trends in wind power development and pricing
The wind PTC subsidy is actually growing , but unequally
Big winners of the recent PTC extensions
Market impacts of the PTC gold rush
Unintended consequences and buyer’s remorse?
It is time to replace the wind PTC with a phased-out ITC for all mature renewable technologies, plus additional support for immature technologies

Tables and charts

This report includes 10 images and tables including:

Figure 1 Historical Wind PPA Prices 1996-January 2014
Figure 2 Location of U.S. wind farms operational after mid-2013 or under construction
Figure 3 Wind PTC revenue as a percentage of unsubsidized levelized costs

Figure 4 Estimated State PTC Revenues From Recent and Under Construction Wind Farms
Figure 5 MISO-MidAmerican Zone Real-time Prices and Weighted Wind Revenue
Figure 6 Correlation between hourly MISO wind generation and MidAmerican Implied Heat Rates
Figure 7 ERCOT HUB Real-time Prices and Weighted Wind Revenue
Figure 8 Correlation between hourly ERCOT wind generation and ERCOT Implied Heat Rates
Figure 9 H1 LTO historical and forecast capacity prices for selected Midwest zones (2015 $/kW-yr)
Figure 10 Estimated wind LCOE using PTC versus using 25% ITC