U.S. Credit Extension May Revive Stalled Wind Industry

(Corrects description of credit in third paragraph.)

The one-year extension of a U.S. tax credit for wind power includes modified terms that may revive an industry that’s expected to stall this year.

The production tax credit was due to expire at the end of 2012 and the extension was part of yesterday’s passage of the bill to avert the so-called fiscal cliff that would have imposed income tax increases for most U.S. workers.

Unlike past extensions, Congress is now allowing the credit to cover wind farms that begin construction in 2013, not just those that go into operation. Uncertainty last year over whether the policy would be renewed is a key reason the U.S. is expected to install 4,800 megawatts of turbines this year, down from an estimated 11,800 megawatts in 2012, Bloomberg New Energy Finance said in a November report.

“This extension allows the industry to reactivate development that had been on hold since mid-year,” Tom Vinson, senior director of federal and regulatory affairs at the American Wind Energy Association, said today in an interview. “The start-construction language provides a longer period of certainty than prior extensions.”

Delayed Recovery

The full benefits of the extension may not be felt this year, Justin Wu, Hong Kong-based head of wind analysis at New Energy Finance, said by e-mail. “Though too late for this year, it will allow the U.S. market to see some recovery in 2014.”

Spain’s Iberdrola SA (IBE), the second-largest builder of U.S. wind farms with more than 4,800 megawatts in operation, would have pursued few new wind developments this year without the revised language. Manufacturers and installers of wind turbines had sought the revision to allow for the 18 months to 24 months needed to develop new wind farms.

“That was pretty critical to resuming development,” Paul Copleman, an Iberdrola spokesman, said today in an interview. “Without that, the extension might not have had any impact this year. We’re in a good position to get some construction started.”

Energy developers were racing to complete work by Dec. 31 to qualify for the tax credit of 2.2 cents a kilowatt-hour for power from wind farms.

“The down-to-the-wire nature of this extension meant that many developers, rushing to finish their projects before the 2012 year-end deadline, probably had to work through the holidays,” Wu said.

The tax credit helped make wind the largest source of new capacity in the U.S. last year, according to New Energy Finance.

Wind energy has the potential to supply as much as 20 percent of America’s electricity by 2030, according to projections from the U.S. Energy Department. AWEA, based in Washington, estimates that extending the tax credit will save as many as 37,000 jobs, according to a statement yesterday after the House passed the budget bill.

To contact the reporters on this story: Iain Wilson in Sydney at iwilson2@bloomberg.net; Christopher Martin in New York at cmartin11@bloomberg.net

To contact the editor responsible for this story: Will Wade at wwade4@bloomberg.net