The production tax credit (PTC) is a federal program that offers incentives to companies for producing electricity from renewable sources like wind energy. The PTC provides a tax credit of 2.3 cents per kilowatt-hour (kWh) of electricity produced by wind facilities for the first 10 years of the facility's operation. Wind energy is an increasingly important part of the United States' overall power generation capacity, and this credit offsets high initial costs so that wind facilities can compete effectively with conventional fossil fuel-based technologies.
The PTC has played a significant role in the development of the wind energy industry in the United States. Since its introduction in 1992, the PTC has helped to drive down the cost of wind energy and increase the number of wind energy facilities in operation. According to the American Wind Energy Association (AWEA), in 2014, projects supported by the PTC were responsible for generating over 100 gigawatts of electricity—enough to power 30 million homes.
The PTC has also had a positive impact on the economy. AWEA estimates that the wind energy industry supports over 114,000 jobs in the United States and has led to billions of dollars in economic activity. In addition, the PTC has helped to reduce the country's dependence on fossil fuels and has played a key role in reducing greenhouse gas emissions.
However, the PTC has not been without its challenges. The credit is only available for a limited period of time and is subject to expiration, which creates uncertainty for the wind energy industry. This uncertainty has led to fluctuations in the number of wind energy facilities being built, as developers rush to qualify for the credit before it expires. In addition, the PTC has been criticized for being an expensive way to incentivize the development of renewable energy, with some arguing that it would be more cost-effective to provide a steady, long-term policy framework for the industry instead.
Despite these challenges, the PTC remains an important driver of wind energy development in the United States. Based on a study conducted by the National Renewable Energy Laboratory (NREL), extending the PTC for an additional five years would lead to construction of 20,000 MW of wind power capacity, creating billions in economic activity.
The production tax credit has played a significant role in the development of the wind energy industry, helping to drive down costs and increase turbine installations—and thereby support economic growth. However, the credit is only available for a limited period of time and is subject to expiration, which creates uncertainty for the wind energy industry. Despite these challenges, the PTC remains an important driver of wind energy development in the United States.
American Wind Energy Association (AWEA) (n.d.). The Production Tax Credit (PTC). https://www.awea.org/policy/production-tax-credit
National Renewable Energy Laboratory (NREL) (2018). Impacts of the Production Tax Credit Extension on the U.S. Wind Industry. https://www.nrel.gov/docs/fy18osti/69991.pdf
US Department of Energy (DOE) (n.d.). Wind Energy Tax Credits. https://www.energy.gov/savings/wind-energy-tax-credits
US Energy Information Administration (EIA) (2021). Renewable & Alternative Fuels. https://www.eia.gov/energyexplained/renewables/