Re-examining the Production Tax Credit for Wind Power

Published By University of Minnesota

• By C. Ford Runge and Douglas G. Tiffany
• Published January 2007
• 26 Page(s)

This study considers six different aspects of incentive packages to promote locally based wind energy. The study concludes that the Production Tax Credit (PTC) can be extended for longer periods (6 to 10 years), ending its on-again, off-again character, and accompanied by two- to three-year fiscal impact assessments. Second, although outright sale of PTC credits is a limited option, assigning ownership rights to investors, including locally based limited liability companies (LLCs), is feasible. Third, this ownership structure can take a number of forms, depending on the arrangement of equity, debt, and ownership. Fourth, despite the salience of the PTC, other federal and state incentives are also critical to many wind projects, suggesting that states need to follow the lead of Minnesota and Iowa in creating additional incentives. Fifth, the fiscal implications of PTC extension are small relative to the benefits of expanded wind for energy security, environmental quality, rural development, and employment. Sixth, in addition to the need for expanded federal and state incentives, especially to locally based entities, regulatory and technical innovations must overcome the constraints to wind transmission.