The cumulative effect of the IRS guidance is that despite the “phase out” in 2019, the federal government will still be paying PTC subsidies and distorting markets at least into the 2030’s.
We’ve been hearing a lot lately about the economics of wind energy. In a recent earnings call, James Robo, CEO of NextEra Energy, predicted that within a decade the cost of wind generation would be more competitive “without incentives” than conventional sources like coal and natural gas. NextEra is one of the largest generators of wind and solar electricity.
Tom Kiernan, CEO of the American Wind Energy Association (AWEA), the $18 million lobbying arm of the wind industry, stated in 2016 that “wind is now the cheapest source of new electric generating capacity” in many parts of the United States. Kiernan is also fond of saying that the wind industry is getting out of the federal subsidy business altogether because of a provision in the PATH Act of 2015 that gradually phases down the industry’s main federal subsidy, known as the Production Tax Credit (PTC). In an interview defending the PTC from being modified in the recent tax reform law, Kiernan implied that the industry will no longer be receiving the federal subsidy because “we made a deal to drop our tax credit to zero over five years.” Tom is right, the subsidy phases down, but a closer look at the mechanics of the PTC shows that the wind industry will still be receiving billions in federal subsidies well beyond 2020.