House Passes Economic Stabilization Bill with Extension of the PTC and ITC
October 3, 2008
One-Year Patch for Wind, but Eight-Year Renewal for Solar; Utilities Now Permitted to Capture Energy Tax Credits
Today the U.S. House of Representatives passed the Emergency Economic Stabilization Act of 2008, the same legislation passed by the Senate on Wednesday that has been hailed as the $700 billion plan to shore up the U.S. financial system. Unlike the version of this legislation which was rejected by the House at the beginning of the week, today's legislation contains extensions for various tax provisions, including a one-year extension of the Production Tax Credit ("PTC") for large-scale wind projects placed in service through December 31, 2009, and an eight-year extension of the Investment Tax Credit ("ITC") for solar projects placed in service through December 31, 2016.
The PTC and ITC have generally enjoyed bipartisan support, but in a period of general economic contraction Congress was forced to adopt a cost-based approach whereby the estimated $8 billion value of these energy tax credits would have to be offset by projected increases in federal revenue. The extension of the PTC is restricted to one year as a result of the current boom in wind development, while the slower development of large-scale solar projects allowed Congress to extend the ITC for eight years. The PTC extension amounts to no more than a four-to-five month "patch" as wind projects which are fully-licensed will most likely have to start construction by next April or May to complete construction prior to the PTC's new expiration date. Conversely, the ITC extension for solar projects is a significant boost to an industry which has been touting itself as the "new wind".
This legislation, which the President has promised to sign when it reaches his desk, would also allow utilities to take advantage of the PTC and the ITC. Opening up the renewable energy market to investment from the country's utilties carries the promise of greater investment and even more competition in an industry crowded with developers but limited by the number of manufacturers.