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Last week, Congress reached agreement on a multi-year extension of tax credits for renewable energy production, an action that is welcome news for the wind and solar industries in the Midwest.
The extension of the Production Tax Credit (PTC) for wind energy and the Investment Tax Credit (ITC) for solar energy will ensure that demand for affordable, homegrown clean energy remains strong in our region, providing a stable development pipeline for renewable energy developers.
Historically, the uncertain nature of the PTC, with multiple stops and starts over the past 15 years, has created a boom-and-bust cycle for the development of wind energy in our country. Unpredictable demand makes project planning and development extremely difficult and presents very real challenges for supply chain companies that have retrained workers and retooled facilities to provide goods and services for the wind industry.
In fact, the last time Congress failed to renew the PTC, in 2012, wind installations dropped 92 percent the following year, causing our economy to lose $23 billion and putting nearly 30,000 Americans out of work. Wind is one of the most affordable sources of electricity generation, and the stability the PTC provides will create a more efficient and dependable marketplace.
Without Congressional action, many experts were forecasting down years for the wind and solar industries in 2017 and 2018. However, last week’s bipartisan agreement will provide the confidence needed to continue scaling up these industries, keeping more Americans employed and creating new sources of revenue for rural communities around the country.
The Midwest, in particular, stands to benefit greatly from a renewed commitment to important tax policy for the renewables industries. Nationwide, preliminary estimates indicate that this multi-year extension will result in $73 billion in new investment in wind and solar, which means big things for the Midwest. Because our region has some of the best wind resources in the country, there is tremendous opportunity for wind energy to not only reliably displace fossil fuel usage here at home but also to export that clean electricity to load centers to the east and south.
As states and utilities consider how they will comply with the Environmental Protection Agency’s Clean Power Plan, the PTC will make wind energy an even-more attractive compliance strategy. Indeed, we see every incentive for Midwest states to aggressively take advantage of the Clean Energy Incentive Program (CEIP) mechanism in CPP State Implementation Plans (SIPs).
Our region is also the home of a burgeoning solar industry. The Midwest currently holds 984 solar companies that employ 14,400 Americans. These workers have brought 373 MW of solar electric capacity online – enough to power 46,000 homes – which attracted $377 million in 2014 solar installation investments.
As a result of smart, forward-looking policies, and with the extension of the ITC, our developer members are excited about the future of solar in the Midwest. Indeed, the renewed tax credit will drive an estimated 20-22 GW of additional solar energy nationwide, which will send solar employment surging in the next decade. This means new growth opportunities for civil engineering firms, construction companies, manufacturing facilities, tax consultants, and other supply chain businesses.
With traditional sources of electricity generation receiving a variety of subsidies for decades (albeit buried in tax code where no annual reauthorization is necessary), the PTC and ITC have helped level the playing field for renewable energy in the US. The policy stability that the PTC and ITC provide is essential in the multi-year process of securing financing, acquiring land leases and permits, conducting engineering studies, hiring workers, and ultimately bringing a project to fruition. The extension of the PTC and ITC will give project developers and utilities the certainty they need to continue planning for renewable energy investments in communities throughout the Midwest.
We may not be able to predict the weather, but with predictable tax policy, Midwest communities stand to benefit whether the skies are sunny or the plains windy.