Governors' Wind Energy Coalition

The U.S. wind energy sector could add as much as 20,000 megawatts of new generation between 2012 and 2016 as developers take advantage of new Treasury Department rules that make new wind farms eligible for federal tax benefits through the end of 2013.

The projections, released yesterday by the Department of Energy’s Energy Information Administration, account for January’s extension of the production tax credit for wind power and subsequent guidance from the Internal Revenue Service giving clear direction to developers on how a project must qualify for the PTC.

That guidance states that developers can qualify for the tax credit of 2.3 cents per kilowatt-hour so long as they break ground on wind farm projects by the end of 2013, or if they have invested 5 percent of the total project’s cost by year’s end.

That is a marked change from earlier versions of the PTC, which held that projects had to be “in service” by the date the PTC was set to expire.

The EIA, in developing its 2013 Annual Energy Outlook last year, based its reference case projections on a scenario in which the PTC was no longer in effect, said Gwen Bredehoeft, an operations analyst in EIA’s Office of Renewable Energy. As such, the industry was expected to add very little new capacity from 2013 to 2016, she added.

With the PTC extension and new IRS guidance, the EIA now projects the wind energy industry will see growth as much as 34 percent higher than originally estimated between 2013 and 2016, while renewables on the whole will see 9 percent higher growth over the same period.

Pace of growth remains uncertain

“The take-away message is that we’re going to see some short- and medium-term growth in wind capacity that otherwise would not have occurred” without the PTC extension, Bredehoeft said. But the pace at which that growth will occur remains unclear, she said.

The increase in wind energy will also partially displace some other forms of both renewable and traditional generation in the reference case, EIA said, including new solar, biomass, coal and natural gas plants

EIA noted in a “Today in Energy” report published on its website that industry uncertainty over the PTC’s prospects for renewal last year resulted in very little development activity in the first quarter of 2013. Now, “as developers have a chance to react to the new IRS clarification, EIA expects that power purchase agreements and financing activity will resume, and the timing of this resumption likely will affect the timing of building new capacity in the near term,” the agency said.

Renewable energy proponents welcomed the new EIA projections as evidence that wind, solar, biomass and other alternative fuels have gained a firm foothold in the U.S. energy economy and that sound government policies can help stimulate that growth.

“American businesses across the country are eagerly embracing all forms of renewable energy, including wind, solar, bioenergy, hydro, geothermal and waste-to-energy technologies,” said Dennis McGinn, CEO of the American Council on Renewable Energy. “We believe that the EIA’s projections on wind energy clearly reflect the value of renewable energy tax credits.”

Michael Goggin, a senior electric industry analyst with the American Wind Energy Association, noted that despite wind energy’s unparalleled growth in recent years, the industry “receives only a small fraction of the support that competing energy resources have received and continue to receive.”

“EIA’s projections for wind energy’s continued growth underscore the marketplace’s confidence, and they prove that with a more stable policy landscape, the sky’s the limit for American wind energy,” he added.