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Let’s create a new PTC that better serves our nation

November 8, 2012

The election is over, the continuation of the Production Tax Credit is now a foregone conclusion, but there’s a lot of work to do still.  With a lame duck congress, it will be an uphill battle to get this done by the end of the year.

But the current strategy of time-limited extensions to the PTC is too…well, arbitrary.  There is no planning behind the timetable, and the approach doesn’t result in the achievement of any specific goal.  The on-again-off-again uncertainty of this approach makes it a very chaotic incentive for the investment world, and this creates an obstacle to the very purpose of the incentive — to encourage commercialization.  So I want to propose a better – much better – approach.

The Department of Energy, in their now famous “2030 Report”, established a clear stretch goal for the wind industry.  The report carefully looked at all of the implications of achieving 20% of the nation’s electrical power from wind energy by the year 2030.  Ambitious, to be sure.  We know that to achieve that goal the industry would have to step up to a level of manufacturing, training, planning, permitting and installation never before achieved anywhere in the world.  I won’t go into the numbers here, but it would require an enormous amount of new effort in a relatively short time.

But, let’s use the report as a goal (because it was very thoroughly studied), and let’s align the tax incentive to the meaningful pursuit of that goal.  So, rather than arbitrarily limiting the PTC to one or two or five years, let’s rewrite the PTC to remain in place until a certain level of capacity is achieved.  If our national goal is 20% wind, then write the PTC to remain in place until we achieve 20%, or some significant portion of that.

The biggest advantage of this approach is that we can all calculate pretty easily how much domestic manufacturing we can create with the assured certainty of this tax incentive.  If the industry knows that the PTC will provide a reasonable profit margin for some number of megawatts of new wind energy, then it will be a pretty simple investment calculation to know how many turbines will have to be manufactured, how many factories will be needed throughout the entire supply chain to build them, and most importantly how many skilled jobs this will create.  The DoE report detailed all of this very thoroughly.

What I propose is a more sensible PTC that is better aligned with the nation’s priorities.  The government shouldn’t offer incentives that are established against meaningless deadlines, but should rather establish incentives that support a plan to achieve a measurable outcome.  In this way, the eventual retirement of the incentive will always be known and will not come later as a surprise.

I would like to urge the American Wind Energy Association to consider this approach as they lobby Washington for the next PTC extension.  Now is the time to contact your representatives and propose that the PTC be rewritten in this way.

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