Congress Extends Production Tax Credit for Renewable, Alternative Energy

renewable energy

Tax credits were the catalysts that boosted America’s then-fledgling alternative energy industry in the 1990s and early 2000s.

Now that renewables and alternative sources aren’t quite as rare, the industry is more robust than before – but it still needs tax credits to support development.

That’s why the industry – not only developers and utilities, but the companies that provide services and equipment to them – cheered the latest $1.1 trillion omnibus spending bill that passed Congress last month. The bill extended vital tax credits for five more years, giving the industry a lifeline for continued growth.

One particularly crucial tax credit was the Production Tax Credit (PTC). Experts credit the PTC with helping to quadruple alternative energy growth from 2008 to now, moving from 16.7 megawatts installed to over 69.4 megawatts installed through the third quarter of 2015. The PTC has been extended for five years and covers projects that begin construction by 2020, offering a credit of 2.3 cents per kilowatt-hour of produced electricity.

The bill also contained several incentives designed to spur near-term construction. For example, projects that begin construction in 2017 will have their tax credit reduced by 20 percent. For 2018, it will move to 40 percent, and for 2019, it will be 60 percent. In this way, developers have an incentive to start work now, rather than simply plan for future construction that may never come to fruition.

Biomass, along with other forms of renewable generation, was included in the PTC extension.

One immediate benefit of the bill is the new life it gives to postponed or cancelled projects. For example, 64 solar energy projects totaling $16.6 billion were supposed to start between 2014 and 2016, but they were placed on hold. Now, these projects and others (including biomass projects) can continue.

The big picture benefit of the tax bill is to take renewable energy projects and make them economically viable. If these projects are feasible and make economic sense, they are more likely to be built, further contributing to America’s use of renewables and alternatives like biomass.