WASHINGTON, DC – Senators James Lankford (R-OK), Kevin Cramer (R-ND), John Hoeven (R-ND), and Shelley Moore Capito (R-WV) along with Representative Kenny Marchant (R-TX) today introduced legislation to completely phase out the federal production tax credit (PTC) for renewables. The bill specifies that any new projects would need to begin construction by the end of this year in order to qualify for the credit, as is the case under current law. This affirms that the extension for 2020 is the last extension the credit will receive.
“This production tax credit was established years ago to help the fledgling renewable energy industry. Now, when you drive through my state and many others with countless wind turbines, you can see that the wind industry is no longer a start-up, new energy source,” said Lankford. “The wind industry is thriving and does not need federal taxpayers’ money to thrive. Even though Congress concluded four years ago that the wind tax credit served its purpose and should be phased out by the end of 2019, the PTC was instead unexpectedly extended for the twelfth time at the end of last year. With $26 trillion in national debt and ever-present deficit spending issues, we must return to the spirit of the 2015 agreement and allow this market-distorting credit to expire for new projects at the end of this year. I am grateful to work with Senators Cramer, Hoeven, and Capito and Representative Marchant to ensure we get this resolved.”
“The wind production tax credit is fundamentally unfair and has long outlived its expiration date,” said Cramer. “Our bill helps level the energy market by forcing this disruptive tax credit to finally expire.”
“We reached a bipartisan consensus to phase out the wind PTC in 2015, recognizing that the technology has reached commercial-viability,” said Hoeven. “This legislation ends the extension. We need to ensure that we have a level playing field, helping maintain a more diverse energy mix and better ensuring homes and businesses have power when needed most.”
“When the renewable energy production tax credit was implemented, it was intended by its authors to be a temporary support for a generation technology that was then too expensive to compete. Since then, we have seen renewables take ever greater market share, particularly wind energy production, and yet the tax incentive remains in effect. This creates an unfair advantage against other energy sources, such as power plants fueled with West Virginia coal and natural gas. This legislation would ensure that the wind PTC would not be extended past 2020, leveling the playing field within our electric markets. We should not be wasting more taxpayer dollars on a credit that completed its goal years ago,” said Capito.
“When the production tax credit was created in 1992, it served as a temporary boost for energy innovation,” said Marchant. “Almost thirty years later, it now acts as a taxpayer-funded handout to the multibillion-dollar wind industry. They regularly produce more energy than the market demands and there is no reason for the tax code to subsidize them while they rake in their profits. That is why I am proud to introduce this legislation that will end the PTC and save taxpayers billions of dollars over the coming decade.”
“For far too long, the electricity marketplace has been distorted by regulatory overreach and massive subsidies that are driving up the cost of electricity and reducing grid reliability,” said Rich Nolan, President and CEO of the National Mining Association (NMA). “Nascent technologies that originally needed support to achieve maturity can now stand on their own, and no longer need taxpayer support—especially at a time when taxpayers can least afford it. This legislation acknowledges the realities of today’s energy market and the need for balance, to ensure that the reliable, affordable baseload power Americans need to keep the lights on is not wiped off the grid by market-manipulation.”
The bill allows any project that previously qualified, or will qualify before the end of this year, to receive the value and duration of the tax credit that was in place at the time the project qualified. The bill would ultimately completely remove the PTC from the tax code once projects qualifying in 2020 finish receiving what is promised to them under current law to guard against future extensions of the credit and to provide certainty around when PTC-related tax expenditures will disappear. Lankford introduced similar legislation as a standalone bill in October 2015 and has offered the provision as an amendment to other previous legislation.
The PTC was established nearly three decades ago as part of the Energy Policy Act of 1992 and since its adoption, wind power has grown tremendously into a self-sustainable, multibillion dollar industry. Wind generation has grown more than 3,000 percent, and capacity has spiked from 1,500 million megawatts in 1992 to over 110,000 megawatts currently. Meanwhile, the cost to taxpayers for the PTC for all qualified renewables has increased from $5.7 billion over the first five years of the credit to $19.5 billion over the 2019-2023 period.
Roughly 35 percent of Oklahoma’s entire electricity generation comes from wind energy. Wind power is an economically sustainable industry, and 37 states, including Oklahoma, have production incentives in place through either renewable portfolio standards or renewable portfolio goals. Ultimately, the federal PTC is a redundancy that subsidizes policies that states are already pursuing through local resources and utility markets. The PTC also creates distortions in electricity markets. Wind producers’ negative bids are subsidy-driven and distort the market by sending incorrect price signals, which can harm the long-term reliability and cost effective operation of the utility.