“The PTC was intended to be a temporary subsidy for a fledgling industry, but has morphed into a massive handout for large corporations, many of which are foreign owned—all at the expense of the American taxpayers. It’s a textbook case of corporate welfare…. It’s past time for the wind industry to sink or swim on its own merits.”
– Thomas Pyle (American Energy Alliance), “PTC Elimination Act Protects American Families,” April 22, 2015.
This week, Representatives Kenny Marchant and Mike Pompeo introduced H.R. 1901 to eliminate the Production Tax Credit (PTC), a subsidy for qualifying renewable energy (mainly wind power) that has been extended time and again since its enactment in 1992. The bill would tighten eligibility requirements for new wind projects, terminate the inflation adjustment provision saving taxpayers about 35 percent, and repeal the underlying statute to end all credits for existing projects by 2025.
Tom Pyle of the American Energy Alliance issued this statement:
The wind lobby says it wants certainty on the wind PTC and that’s exactly what this bill accomplishes.
The PTC was intended to be a temporary subsidy for a fledgling industry, but has morphed into a massive handout for large corporations, many of which are foreign owned—all at the expense of the American taxpayers. It’s a textbook case of corporate welfare. Every year Big Wind clamors for an extension of the PTC while at the same time claiming they don’t need the credit to be competitive. It’s past time for the wind industry to sink or swim on its own merits.
Congressmen Marchant and Pompeo are offering up reasonable reforms that give certainty to wind producers while protecting the long-term interests of American families. Now it’s upon the wind industry to meet Congress halfway and prove that they are ready and willing to get off the government dole.
Press Release Summary
The PTC Elimination Act establishes a concrete phase-out of the renewable energy production tax credit (PTC) and takes meaningful steps to ensure that it is not needlessly extended in the future.
The PTC was originally designed to help nascent renewable energy industries become economically self-sustaining. Yet over the years the credit has primarily become a large subsidy for a wind industry that no longer needs it. PTC was created in 1992, and has been repeatedly extended since, with decades of promises that it would no longer be needed after a few years. In addition, even after expiration of the PTC, facilities that secured eligibility before expiration receive the credit for ten years of production.
Wind power has grown tremendously since 1992 and is now a multibillion dollar industry. Capacity has increased 5,000% and production of energy by wind has surged from 2.8 million megawatt-hours to 167.6 million megawatt-hours.1 Businesses in the wind industry have represented to the Ways and Means Committee that the industry could survive with a credit worth 60% of the current credit.
Yet the wind industry continues to get a subsidy that, per kilowatt hour, amounts to over 10 times that received by other clean energy sources, such as natural gas and nuclear. This creates market disruptions, leading to generators’ paying for grid operators to take their wind energy, and endangering the environment by putting pressure on other clean energy and potentially forcing greater reliance on older forms of power.
The PTC Elimination Act would establish a phase-out and help secure the non-renewal of the PTC by:
1) Repealing the inflation adjustment that exists for current recipients of the PTC, reducing their subsidy by approximately 35% for their remaining time.
2) Clarifying the “beginning of construction” threshold (which must have been met by December 31, 2014, for new facilities to be eligible to start receiving PTC) to strengthen requirements that eligible construction be continuous, significant, and finite.
3) Repealing the entirety of the PTC’s statutory framework, Sec. 45 of the Internal Revenue Code, after December 31, 2025, to put a hard stop date on credits and deter extenders.
4) Expressing the sense of Congress that PTC should not be extended or renewed, either retroactively or going forward, and should remain expired as of December 31, 2014.
Proposals similar to the PTC Elimination Act have been estimated to save $9.6 billion over 10 years.2 By restraining PTC extenders, and considering current dollar value, this Act’s practical savings can be even greater. These will then be passed on to American businesses via an across-the-board offset applied to corporate tax rates, which are widely agreed upon as being too high for global competitiveness.
The PTC Elimination Act of 2015 (H.R. 1901) can be read here.