Proposed US tax cut threatens $50bn investment

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Richard Heap
November 6, 2017
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This content is from our archive. Some formatting or links may be broken.
Proposed US tax cut threatens $50bn investment

It’s Sod’s Law. You spend months working on a special report with politicians acting one way. Then you go to print and – hey presto! – that night the politicians start acting in a totally different way. Damn you, Republicans in the US House of Representatives!

This is the news that came out on Thursday night that a group of Republicans in the US House have finally brought out their tax reform bill, and it could cut the wind production tax credit in the US by one-third. It is a year since Donald Trump won the race to the White House and, despite initial concerns, growth in US wind has stayed strong. Certainty over the PTC has been key to that.

This goes back two years. US Congress agreed a bipartisan deal in late 2015 that extended the PTC by five years, including a wind-down period to get rid of the incentive.

That gave US wind investors, developers and manufacturers the confidence they needed to press on with projects for the last two years. There were almost 30GW of wind projects being built (13.8GW) or in advanced development (15.9GW) in the third quarter of 2017, according to statistics from the American Wind Energy Association on 26 October. Indeed Tom Kiernan, chief executive of AWEA, said the US wind industry was on track to deliver $85bn economic activity and 50,000 new jobs by 2020.

But this new threat to the PTC puts that strength in danger.

Under the Republicans’ planned tax reform bill, the PTC for the wind of 2.4 cents per KWh would be cut by one third to 1.5 cents per KWh, and disrupt the investment plans made as a result of the certainty of the five-year deal.

The bill could also scrap a four-year window for developers to complete projects after construction starts; and, in addition, we have seen concerns that the five-year extension agreed in 2015 could be scrapped, although fears about that are receding.

Whatever happens, these reports will have plenty of developers, investors and manufacturers thinking very hard about the viability of their projects and construction timetables.

AWEA came out with a strong statement on 2 November warning that reneging on the terms of the five-year extension puts $50bn investment at risk, with most of that activity concentrated in Republican heartlands. Kiernan said this would “pull the rug out from under 100,000 US wind workers and 500 American factories, including some of the fastest-growing jobs in the country”.

It would also send a “chilling” message to other private investors in US infrastructure: if Congress agrees to change the terms of these deals after investment decisions have already been made then how can investors in other sectors know that the same will not happen to them? Retroactive changes can be devastating for wind. Just ask wind professionals in Spain and Poland.

The argument here is not about whether wind needs the PTC.
Yes, the support has been vital in the growth of what is arguably the world’s most exciting wind market today. But wind power is getting cheaper and becoming less reliant on government support. We can see with the use of Contracts for Difference in UK offshore wind that these tariffs are just as important in giving price certainty to governments as well as investors.

Wind is better able to cope without the PTC than ever. The large corporates that are signing power purchase agreements to buy electricity produced by wind farms are a great source of support.

But this isn't about whether wind needs the PTC. It is about the need for investor certainty and honouring agreed commitments.

For now, we are retaining some perspective. Yes, the threat to the PTC is a concern for those operating in the US, and AWEA is right to come out strongly against this proposal. It would be failing its members if it didn’t. But this is also an idea in a first draft of a bill that could face big problems for wildly unpopular policies such as its large proposed tax cuts for major companies. We expect it to be heavily amended, and we are already seeing opposition about the PTC change from members of the House and Senate.

We take it seriously – but we aren’t pulping our reports just yet.

It’s Sod’s Law. You spend months working on a special report with politicians acting one way. Then you go to print and – hey presto! – that night the politicians start acting in a totally different way. Damn you, Republicans in the US House of Representatives!

This is the news that came out on Thursday night that a group of Republicans in the US House have finally brought out their tax reform bill, and it could cut the wind production tax credit in the US by one-third. It is a year since Donald Trump won the race to the White House and, despite initial concerns, growth in US wind has stayed strong. Certainty over the PTC has been key to that.

This goes back two years. US Congress agreed a bipartisan deal in late 2015 that extended the PTC by five years, including a wind-down period to get rid of the incentive.

That gave US wind investors, developers and manufacturers the confidence they needed to press on with projects for the last two years. There were almost 30GW of wind projects being built (13.8GW) or in advanced development (15.9GW) in the third quarter of 2017, according to statistics from the American Wind Energy Association on 26 October. Indeed Tom Kiernan, chief executive of AWEA, said the US wind industry was on track to deliver $85bn economic activity and 50,000 new jobs by 2020.

But this new threat to the PTC puts that strength in danger.

Under the Republicans’ planned tax reform bill, the PTC for the wind of 2.4 cents per KWh would be cut by one third to 1.5 cents per KWh, and disrupt the investment plans made as a result of the certainty of the five-year deal.

The bill could also scrap a four-year window for developers to complete projects after construction starts; and, in addition, we have seen concerns that the five-year extension agreed in 2015 could be scrapped, although fears about that are receding.

Whatever happens, these reports will have plenty of developers, investors and manufacturers thinking very hard about the viability of their projects and construction timetables.

AWEA came out with a strong statement on 2 November warning that reneging on the terms of the five-year extension puts $50bn investment at risk, with most of that activity concentrated in Republican heartlands. Kiernan said this would “pull the rug out from under 100,000 US wind workers and 500 American factories, including some of the fastest-growing jobs in the country”.

It would also send a “chilling” message to other private investors in US infrastructure: if Congress agrees to change the terms of these deals after investment decisions have already been made then how can investors in other sectors know that the same will not happen to them? Retroactive changes can be devastating for wind. Just ask wind professionals in Spain and Poland.

The argument here is not about whether wind needs the PTC.
Yes, the support has been vital in the growth of what is arguably the world’s most exciting wind market today. But wind power is getting cheaper and becoming less reliant on government support. We can see with the use of Contracts for Difference in UK offshore wind that these tariffs are just as important in giving price certainty to governments as well as investors.

Wind is better able to cope without the PTC than ever. The large corporates that are signing power purchase agreements to buy electricity produced by wind farms are a great source of support.

But this isn't about whether wind needs the PTC. It is about the need for investor certainty and honouring agreed commitments.

For now, we are retaining some perspective. Yes, the threat to the PTC is a concern for those operating in the US, and AWEA is right to come out strongly against this proposal. It would be failing its members if it didn’t. But this is also an idea in a first draft of a bill that could face big problems for wildly unpopular policies such as its large proposed tax cuts for major companies. We expect it to be heavily amended, and we are already seeing opposition about the PTC change from members of the House and Senate.

We take it seriously – but we aren’t pulping our reports just yet.

It’s Sod’s Law. You spend months working on a special report with politicians acting one way. Then you go to print and – hey presto! – that night the politicians start acting in a totally different way. Damn you, Republicans in the US House of Representatives!

This is the news that came out on Thursday night that a group of Republicans in the US House have finally brought out their tax reform bill, and it could cut the wind production tax credit in the US by one-third. It is a year since Donald Trump won the race to the White House and, despite initial concerns, growth in US wind has stayed strong. Certainty over the PTC has been key to that.

This goes back two years. US Congress agreed a bipartisan deal in late 2015 that extended the PTC by five years, including a wind-down period to get rid of the incentive.

That gave US wind investors, developers and manufacturers the confidence they needed to press on with projects for the last two years. There were almost 30GW of wind projects being built (13.8GW) or in advanced development (15.9GW) in the third quarter of 2017, according to statistics from the American Wind Energy Association on 26 October. Indeed Tom Kiernan, chief executive of AWEA, said the US wind industry was on track to deliver $85bn economic activity and 50,000 new jobs by 2020.

But this new threat to the PTC puts that strength in danger.

Under the Republicans’ planned tax reform bill, the PTC for the wind of 2.4 cents per KWh would be cut by one third to 1.5 cents per KWh, and disrupt the investment plans made as a result of the certainty of the five-year deal.

The bill could also scrap a four-year window for developers to complete projects after construction starts; and, in addition, we have seen concerns that the five-year extension agreed in 2015 could be scrapped, although fears about that are receding.

Whatever happens, these reports will have plenty of developers, investors and manufacturers thinking very hard about the viability of their projects and construction timetables.

AWEA came out with a strong statement on 2 November warning that reneging on the terms of the five-year extension puts $50bn investment at risk, with most of that activity concentrated in Republican heartlands. Kiernan said this would “pull the rug out from under 100,000 US wind workers and 500 American factories, including some of the fastest-growing jobs in the country”.

It would also send a “chilling” message to other private investors in US infrastructure: if Congress agrees to change the terms of these deals after investment decisions have already been made then how can investors in other sectors know that the same will not happen to them? Retroactive changes can be devastating for wind. Just ask wind professionals in Spain and Poland.

The argument here is not about whether wind needs the PTC.
Yes, the support has been vital in the growth of what is arguably the world’s most exciting wind market today. But wind power is getting cheaper and becoming less reliant on government support. We can see with the use of Contracts for Difference in UK offshore wind that these tariffs are just as important in giving price certainty to governments as well as investors.

Wind is better able to cope without the PTC than ever. The large corporates that are signing power purchase agreements to buy electricity produced by wind farms are a great source of support.

But this isn't about whether wind needs the PTC. It is about the need for investor certainty and honouring agreed commitments.

For now, we are retaining some perspective. Yes, the threat to the PTC is a concern for those operating in the US, and AWEA is right to come out strongly against this proposal. It would be failing its members if it didn’t. But this is also an idea in a first draft of a bill that could face big problems for wildly unpopular policies such as its large proposed tax cuts for major companies. We expect it to be heavily amended, and we are already seeing opposition about the PTC change from members of the House and Senate.

We take it seriously – but we aren’t pulping our reports just yet.

It’s Sod’s Law. You spend months working on a special report with politicians acting one way. Then you go to print and – hey presto! – that night the politicians start acting in a totally different way. Damn you, Republicans in the US House of Representatives!

This is the news that came out on Thursday night that a group of Republicans in the US House have finally brought out their tax reform bill, and it could cut the wind production tax credit in the US by one-third. It is a year since Donald Trump won the race to the White House and, despite initial concerns, growth in US wind has stayed strong. Certainty over the PTC has been key to that.

This goes back two years. US Congress agreed a bipartisan deal in late 2015 that extended the PTC by five years, including a wind-down period to get rid of the incentive.

That gave US wind investors, developers and manufacturers the confidence they needed to press on with projects for the last two years. There were almost 30GW of wind projects being built (13.8GW) or in advanced development (15.9GW) in the third quarter of 2017, according to statistics from the American Wind Energy Association on 26 October. Indeed Tom Kiernan, chief executive of AWEA, said the US wind industry was on track to deliver $85bn economic activity and 50,000 new jobs by 2020.

But this new threat to the PTC puts that strength in danger.

Under the Republicans’ planned tax reform bill, the PTC for the wind of 2.4 cents per KWh would be cut by one third to 1.5 cents per KWh, and disrupt the investment plans made as a result of the certainty of the five-year deal.

The bill could also scrap a four-year window for developers to complete projects after construction starts; and, in addition, we have seen concerns that the five-year extension agreed in 2015 could be scrapped, although fears about that are receding.

Whatever happens, these reports will have plenty of developers, investors and manufacturers thinking very hard about the viability of their projects and construction timetables.

AWEA came out with a strong statement on 2 November warning that reneging on the terms of the five-year extension puts $50bn investment at risk, with most of that activity concentrated in Republican heartlands. Kiernan said this would “pull the rug out from under 100,000 US wind workers and 500 American factories, including some of the fastest-growing jobs in the country”.

It would also send a “chilling” message to other private investors in US infrastructure: if Congress agrees to change the terms of these deals after investment decisions have already been made then how can investors in other sectors know that the same will not happen to them? Retroactive changes can be devastating for wind. Just ask wind professionals in Spain and Poland.

The argument here is not about whether wind needs the PTC.
Yes, the support has been vital in the growth of what is arguably the world’s most exciting wind market today. But wind power is getting cheaper and becoming less reliant on government support. We can see with the use of Contracts for Difference in UK offshore wind that these tariffs are just as important in giving price certainty to governments as well as investors.

Wind is better able to cope without the PTC than ever. The large corporates that are signing power purchase agreements to buy electricity produced by wind farms are a great source of support.

But this isn't about whether wind needs the PTC. It is about the need for investor certainty and honouring agreed commitments.

For now, we are retaining some perspective. Yes, the threat to the PTC is a concern for those operating in the US, and AWEA is right to come out strongly against this proposal. It would be failing its members if it didn’t. But this is also an idea in a first draft of a bill that could face big problems for wildly unpopular policies such as its large proposed tax cuts for major companies. We expect it to be heavily amended, and we are already seeing opposition about the PTC change from members of the House and Senate.

We take it seriously – but we aren’t pulping our reports just yet.

It’s Sod’s Law. You spend months working on a special report with politicians acting one way. Then you go to print and – hey presto! – that night the politicians start acting in a totally different way. Damn you, Republicans in the US House of Representatives!

This is the news that came out on Thursday night that a group of Republicans in the US House have finally brought out their tax reform bill, and it could cut the wind production tax credit in the US by one-third. It is a year since Donald Trump won the race to the White House and, despite initial concerns, growth in US wind has stayed strong. Certainty over the PTC has been key to that.

This goes back two years. US Congress agreed a bipartisan deal in late 2015 that extended the PTC by five years, including a wind-down period to get rid of the incentive.

That gave US wind investors, developers and manufacturers the confidence they needed to press on with projects for the last two years. There were almost 30GW of wind projects being built (13.8GW) or in advanced development (15.9GW) in the third quarter of 2017, according to statistics from the American Wind Energy Association on 26 October. Indeed Tom Kiernan, chief executive of AWEA, said the US wind industry was on track to deliver $85bn economic activity and 50,000 new jobs by 2020.

But this new threat to the PTC puts that strength in danger.

Under the Republicans’ planned tax reform bill, the PTC for the wind of 2.4 cents per KWh would be cut by one third to 1.5 cents per KWh, and disrupt the investment plans made as a result of the certainty of the five-year deal.

The bill could also scrap a four-year window for developers to complete projects after construction starts; and, in addition, we have seen concerns that the five-year extension agreed in 2015 could be scrapped, although fears about that are receding.

Whatever happens, these reports will have plenty of developers, investors and manufacturers thinking very hard about the viability of their projects and construction timetables.

AWEA came out with a strong statement on 2 November warning that reneging on the terms of the five-year extension puts $50bn investment at risk, with most of that activity concentrated in Republican heartlands. Kiernan said this would “pull the rug out from under 100,000 US wind workers and 500 American factories, including some of the fastest-growing jobs in the country”.

It would also send a “chilling” message to other private investors in US infrastructure: if Congress agrees to change the terms of these deals after investment decisions have already been made then how can investors in other sectors know that the same will not happen to them? Retroactive changes can be devastating for wind. Just ask wind professionals in Spain and Poland.

The argument here is not about whether wind needs the PTC.
Yes, the support has been vital in the growth of what is arguably the world’s most exciting wind market today. But wind power is getting cheaper and becoming less reliant on government support. We can see with the use of Contracts for Difference in UK offshore wind that these tariffs are just as important in giving price certainty to governments as well as investors.

Wind is better able to cope without the PTC than ever. The large corporates that are signing power purchase agreements to buy electricity produced by wind farms are a great source of support.

But this isn't about whether wind needs the PTC. It is about the need for investor certainty and honouring agreed commitments.

For now, we are retaining some perspective. Yes, the threat to the PTC is a concern for those operating in the US, and AWEA is right to come out strongly against this proposal. It would be failing its members if it didn’t. But this is also an idea in a first draft of a bill that could face big problems for wildly unpopular policies such as its large proposed tax cuts for major companies. We expect it to be heavily amended, and we are already seeing opposition about the PTC change from members of the House and Senate.

We take it seriously – but we aren’t pulping our reports just yet.

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Full archive access is available to members only

Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.