Sens. Tom previous Carper (D-Del.) and Olympia Snowe (R-Maine) proposed legislation July 21 that would offer financial incentives through tax credits for investment in offshore wind energy.
The Incentivizing Offshore Wind Power Act (bill unnumbered) would extend investment tax credits for the first 3,000 megawatts of offshore wind facilities, or about 600 turbines, put into service by amending Section 48 of the Internal Revenue Code, according to a release about the legislation. After being awarded a credit, companies would have five years to install an offshore wind facility and cannot receive other production or investment tax credits along with the offshore wind investment credit.
“This legislation is essential to encourage the continued growth of this fledgling industry,” previous Carper said in a statement.
The act has been praised for its ability to not only offer incentives for developing renewable energy but also for creating jobs. The Offshore Wind Development Coalition said the act could lead to employment for tens of thousands of workers in high-paying, clean-tech jobs with the potential to become the newest manufacturing sector.
“I'm encouraged by this bipartisan legislation to expand offshore wind energy through targeted tax incentives,” said Sen. Chris Coons (D-Del.), a co-sponsor of the bill, in a statement. “By tapping the offshore wind energy sector, we are further ensuring our country remains a leader in clean, renewable energy development that will create a wealth of new high-tech jobs in the region.”
The bill, which is modeled after the 2005 Energy Policy Act's production tax credit for nuclear power, would allow Treasury to allocate a 30 percent tax credit for the first 3,000 megawatts of offshore wind energy.
The facilities can be located in “the inland navigable waters of the United States, including the Great Lakes, or in the coastal waters of the United States, including the territorial seas of the United States, the exclusive economic zone of United States, and the outer Continental Shelf of the United States.”
These facilities can generate electricity that is more consistent than onshore wind and are located near major cities, Snowe said in a statement. Winds off the Atlantic Coast could generate 330-giga-watts of power—enough to power nine states from Massachusetts to North Carolina, according the release, which cited the University of Delaware.
Better Option For Offshore Wind Sector
Previously, practitioners had criticized renewable energy subsidies, like the Investment Tax Credit (ITC), because they are temporary and can cause uncertainty in the market (99 DTR G-1, 5/23/11). Because it takes longer to develop renewable energy projects, the temporary nature of these credits can be a hindrance for generating financial support in the industry, practitioners said.
In 2009, as a part of the American Recovery and Reinvestment Act of 2009, Congress extended production tax credits for all wind through the end of 2012. Currently, the deadline for wind farms—onshore or offshore—to qualify for the ITC is an almost impossible barrier for offshore wind because of the long lead time required for development, according to the Offshore Wind Development Coalition.
Other types of renewable energy projects have longer deadlines like 2013 for marine and hydrokinetic facilities or 2016 for solar energy projects. Even for onshore wind development, the 2012 deadline is attainable, but offshore farms face a longer investment time, a still developing industry, and higher initial costs.
Although projects are in the development process in Delaware, Massachusetts, Rhode Island and New Jersey, no offshore wind project has been built in the United States partially because of federal permitting delays. Without the bill, the credits might not be available for wind projects being developed and permitted off the Atlantic Coast and in the Great Lakes, according to the coalition's statement.
“This law would send the necessary signals to the financial markets that offshore wind farms can be developed and financed,” said Jim Lanard, Offshore Wind Development Coalition president, in a statement. “The current unavailability of the ITC for offshore wind farms may effectively put financing for these projects out of reach. Equally troublesome, if the ITC is renewed only for short periods just before it expires, as is often the case with other ‘extenders', it may never be usable for offshore wind. The previous Carper-Snowe bill overcomes the ITC-related challenges that offshore wind developers currently face.”
The legislation will help the U.S. reach its goal of operating 20 percent wind energy by 2030, said Sen. Snowe in a statement.