It’s not the whole answer but it’s an important step in the right direction.
That’s the take of America’s nascent offshore wind industry on the U.S. Senate Finance Committee’s recent approval of a plan to extend an investment tax credit on offshore wind installations by one year until the end of 2013.
Crucially, the panel’s vote allows projects to be eligible for the credit if they “commence construction” within the qualifying period. That’s a change from the previous language which required installations to be “placed in service” during that time – a restriction that effectively rules out offshore wind projects because of their five- to seven-year lead time from inception to implementation.
The measure would allow qualifying projects to take the investment tax credit in lieu of a production tax credit which currently applies to producers of offshore wind power and other sources of renewable energy. The PTC was also extended by a year to 2013.
By itself, the one-year extension of the ITC – which was due to expire at the end of 2012 – isn’t going to kick-start the U.S. offshore wind industry, which has yet to build a single utility-scale wind farm, in contrast to Europe where offshore wind has been contributing to national grids for some 20 years.
But U.S. offshore wind advocates hailed the vote as an important first step to overcoming investors’ reluctance to support projects such as NRG’s Bluewater Wind, a proposed wind farm off the coast of Delaware, which was put on hold late last year because the company was unable to find investment partners.
The Aug. 2 vote is a “critical step towards the establishment of a sustainable and robust offshore wind industry,” said Jim Lanard, President of the Offshore Wind Development Coalition. “Congressional support for the investment tax credit for offshore wind sends the appropriate signal to investors who need the certainty that the Senate Committee’s action would provide.”
For the measure to spur actual construction of wind farms, it will need to be extended again, a development that looks more likely given the strong bipartisan backing for the bill, Lanard said.
“I’m cautiously optimistic that will happen,” he told Breaking Energy. He predicted that cross-party support for the measure as it progresses through Congress will be boosted by the job-creating potential of the offshore-wind industry.
It really fits with what Republicans and Democrats say is wrong with the economy,” – Lanard.
Lanard predicted the measure will boost prospects for Cape Wind, the long-delayed 420 mw wind farm off Massachusetts, and for pilot projects off Block Island, NY and Atlantic City, NJ.
The proposed wind farm off Delaware – the subject of ongoing lease negotiations between NRG and the U.S. Interior Department – is unlikely to qualify for an ITC under the current extension given lengthy permitting requirements, but it will nevertheless be more attractive to investors because of the Senate committee’s vote, Lanard said.
“The Delaware lease is going to be more interesting to more people,” he said.
A Senate aide who was involved in negotiations over the bill, and who spoke on condition of anonymity, said she doesn’t expect any U.S. wind farms to be placed in service before 2015/16, and that includes Cape Wind, which may begin construction in 2014.
But the ITC measure is now more likely to eventually become law, and that’s important for investors. “There is a very good chance that a piece of this will see the light of day,” she said.
Oceana, a conservation group, said the committee’s vote makes it more likely that offshore wind will attract needed financing.
Read “Wind Rush,” and Breaking Energy white paper that analyzes the industry at the global level, here.
“Extending the ITC would send a clear signal to investors that America is open for business and committed to producing clean and domestic energy,” it said in a statement.
The measure was included in the Family and Business Tax Cut Certainty Act of 2012, a bill that extended dozens of tax cuts that have expired or will expire at the end of this year, and is seen as a prelude to more comprehensive tax reform in Congress.
The bipartisan vote of 19-5 for the bill augurs well for its passage through the full Senate and the House, its backers said. Most Republicans on the committee backed the bill despite Republican presidential candidate Mitt Romney’s reported comments in late July indicating that he would end the wind-production tax credit.