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Federal Incentives
Wind Energy Production Tax Credit The Wind Energy Production Tax Credit (PTC) is a per kilowatt-hour tax credit for wind generated electricity sold. Available during the first ten years of operation, it provides 1.5¢ per kWh credit adjusted annually for inflation. The adjusted credit amount for 2002 is 1.8¢ per kWh. Note that the PTC is only available for electricity sold to another party; thus, a turbine generating electricity for use on the owner's farm does not qualify. Enacted as part of the Energy Policy Act of 1992, the credit, which had expired at the end of 2001, was extended in March 2002. The credit is set to expire again December 31, 2003. Although there is broad support for another extension of the PTC, efforts have been unsuccessful so far. (Current as of October 2003.) A long-term extension of the PTC would provide much 60 needed stability to the wind industry because it would allow for long-term planning. The tax credit applies to all wind power facilities owned by a tax-paying entity. For non-tax-paying entities, such as municipal electric utilities, a separate provision, the Renewable Energy Production Incentive (REPI), provides a direct payment based on annual energy production. Although designed to be comparable with the PTC, the exact level of the REPI is contingent on annual appropriations from Congress, and it is considered a less certain subsidy than the PTC. The value of the PTC is reduced if the facility owner also receives certain types of local or state financial incentives such as initial-cost buy downs or investment tax credits. Wind and biomass facilities, as well as other renewable energy facilities, also benefit from an accelerated capital cost depreciation schedule of five years. The rules associated with this credit limit the type of tax liability that can be offset. You will need a tax attorney to help ensure that your project will be able to use the credit. For more information and updates on the status of the PTC, visit www.windustry.org/resources/legislation.htm. Federal Renewable Energy Production Incentive The REPI provides financial incentive payments for electricity produced and sold by new, qualifying renewable energy (including wind) generation facilities. Eligible electricity production facilities are those owned by local and state government entities, such as municipal utilities, and not-for-profit electric cooperatives. Qualifying facilities are eligible for annual incentive payments of 1.5¢ per kilowatt-hour for the first ten-year period of their operation. This incentive is not considered bankable since it must be appropriated each year by Congress. It is set to expire in the fall of 2003 if Congress does not take action to renew the program. U.S. Department of Agriculture Renewable Energy Systems and Energy Efficiency Improvements Program The 2002 Farm Bill's Energy Title provides $23 million per year from 2003-2007 in the form of grants, loans, and loan guarantees for renewable energy (including wind) projects. Only the grant program was implemented in 2003. According to 2003 guidelines, applicants for the program must be agricultural producers or rural small businesses, U.S. citizens or legal residents, and have demonstrated financial need. Rural Development grant funds may be used to pay up to 25 percent of the eligible project costs. Eligible projects include those that derive energy from a wind, solar, biomass, or geothermal source, or hydrogen derived from biomass or water using wind, solar, or geothermal energy sources. Awards will be made on a competitive basis for the purchase of renewable energy systems and to make energy improvements. New guidelines and rules will be implemented for the next round of applications in 2004 and subsequent years. In August 2003, the USDA announced winners from the first round of grant applications. Over $21 million was awarded for projects in 24 states. Minnesota led all states with $4,678,632, followed by New York ($2,878,027), Illinois ($2,186,596), and Ohio ($2,043,612). Many grants will support wind projects, including small residential-scale turbines, farmer-owned utility-scale turbines, and rural electric cooperative wind projects. For a complete list of 2003 award winners, see www.rurdev.usda.gov/rd/newsroom/2003/renew_en.html. USDA press release: www.rurdev.usda.gov/rd/newsroom/2003/9006awardees.html For more general information, visit www.rurdev.usda.gov/rd/newsroom/2003/9006awardees.html or contact:
USDA Rural Development State Office - IL Depreciation The federal aligned accelerated cost recovery system helps businesses recover investment in renewable energy. Wind has a five-year depreciation schedule under this program. (I.R.C. Subtitle A, Ch. 1, Subch. B, Part VI, Sec. 168 [1994]). Public Utilities Regulatory Policy Act of 1978 (PURPA) PURPA was enacted as part of the National Energy Act of 1978, during a time of unprecedented energy supply instability in the United States. The law requires utilities to purchase energy from nonutility generators or small renewable energy producers that can produce electricity for less than what it would have cost for the utility to generate the power, or the "avoided cost." Although once considered a key incentive for renewable energy, PURPA is less helpful for renewable energy today due to lower baseload fossil energy prices. Important Information About Small Turbine Projects |
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