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Long-term policies for a stable base market

The last couple of years have been turbulent years for the industry. The global economy faced several crises like the credit crunch, the Euro crisis and the fiscal cliff in the USA. None of these are completely solved but it looks as if we may have found the way up again.

Congress has included the long-sought extension of wind energy tax credits in the final passage of a bill to avert the ‘fiscal cliff’.  The version included in the deal would cover all wind projects that start construction in 2013. Companies that manufacture wind turbines and install them sought that definition to allow for the 18–24 months it takes to develop a new wind farm. Leaders of the Senate Finance Committee included that version in a ‘tax extenders’ package they assembled in August, which made it into the overall fiscal cliff deal that passed the Senate and the House. The bill has been signed into law by President Barack Obama. The extension, while not a long-term policy solution, at least prevents an abrupt end to the tax incentive.

The big question, of course, is what will happen now. As said before it takes 18–24 months to develop a wind farm. To benefit from the current Production Tax Credit (PTC), construction should start in 2013. You don’t have to be a rocket scientist to see that if there is no long-term policy we will face a ‘stall’ situation again. And even now that the PTC is extended for one year, companies still continue to lay off people due to the uncertain market situation.

A long-term solution is needed and I applaud the American Wind Energy Association (AWEA), which just recently investigated a six-year phase-out of wind energy PTC. The organisation has described what a future phase-out of its primary federal incentive could look like. The result of AWEA’s analysis specifies that the tax credit would start at 100% of the current 2.2 cents a kilowatt-hour for projects started in 2013, and be phased down to 90% of that value for projects placed in service in 2014, 80% in 2015, 70% in 2016, and 60% in both 2017 and 2018, ending after that. The analysis indicates that this would allow wind energy to establish a stable base market in the USA that the industry can build on, with further market and technology innovation.

If the USA implements a long-term policy it will benefit the whole industry, but other countries should also adopt a long-term and consistent policy to really develop a global stable base market.

Let me end this publisher’s note with the most important thing: my best wishes for 2013. I hope it may bring health and prosperity for you and for your families.

Enjoy reading,

Floris Siteur
Publisher
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