Wind industry avoids a tax blow Renewable energy credit lives on for another year in fiscal cliff legislation

Turbines dot the landscape at BP's Sherbino Mesa II wind farm in Fort Stockton. The federal wind production tax credit provides a 2.2 cent break for every kilowatt-hour of energy produced during the first 10 years. less Turbines dot the landscape at BP's Sherbino Mesa II wind farm in Fort Stockton. The federal wind production tax credit provides a 2.2 cent break for every kilowatt-hour of energy produced during the first 10 ... more Photo: Michael Paulsen, Staff Photo: Michael Paulsen, Staff Image 1 of / 3 Caption Close Wind industry avoids a tax blow 1 / 3 Back to Gallery

The deal that kept the nation short of the fiscal cliff also spared wind energy advocates a tax consequence they had feared would becalm the industry.

Among provisions of the legislation to avert automatic Jan. 1 tax increases and spending cuts was the extension for another year of the renewable energy production tax credit that expired at the end of 2012.

"This legislation helps to level the playing field from a tax policy standpoint," said Bob Dineen, president and CEO of the Renewable Fuels Association, noting that oil exploration benefits from accelerated depreciation, which moves up tax advantages.

In another win for the renewable industry, the legislation changes the rules to make facilities eligible for tax credits in the future as long as construction begins this year, even if they don't start operating. The distinction is important since the tax uncertainty led to postponement of many projects.

Texas is the nation's No. 1 wind energy producer, and advocates say the extended production tax credits will encourage the state to continue building infrastructure - notably transmission lines to move wind energy from remote wind farm locations to more populated areas.

"We are poised to tap into even more wind power, and the tax credits are critical for making sure that happens," said Luke Metzger, director of Environment Texas.

The wind production tax credit provides a 2.2 cent tax break for every kilowatt-hour of energy produced during the first 10 years of a wind farm's operation, on the condition that the electricity is sold to entities unrelated to the producer. Any unused credits may be carried forward for up to 20 years.

The legislation also extends the biofuel production credit for a year, paying biofuels producers up to $1.01 per gallon sold and allowing depreciation deductions for new plants.

Industry advocates have said that the extension of the biofuel credits will help encourage research into using non-food sources that otherwise wouldn't be commercially viable.

Most U.S. ethanol is made from corn.

"This will allow the continued evolution of the industry to be more than just corn-based ethanol, so that you are expanding to new technologies and new feedstocks, such as algae," Dineen said.

The bill also extends tax credits for biodiesel and renewable diesel.

The extension of the wind tax credit will allow producers to complete agreements with utilities and other power purchasers, which was difficult when the credit was uncertain because it affects the sales price, said Matt Archer, a lawyer specializing in energy infrastructure projects at Houston-based McDermott, Will and Emery.

The inability to complete the power purchase agreements contributed to project postponements.