Offshore wind tax credit doesn’t make cut

Pulled from federal legislation at request of White House

STATE HOUSE NEWS SERVICE

CLIMATE ADVOCATES and industry groups were critical of the US House this week after a long-term extension of a tax credit designed to assist offshore wind energy developers did not come to pass as part of spending bills, but some wind watchers said offshore projects might still be able to claim some federal benefits.

The House adopted a series of tax law updates and tax credit extensions earlier this week, but an expansive package of clean energy tax credits — including new incentives specific to offshore wind — that have been proposed in the House was not included in the final language, angering advocates.

“The tax credit extensions for clean energy that are included in Congress’ spending deal are weak at best,” Shannon Heyck-Williams, director of climate and energy policy at the National Wildlife Federation, said. “Market forces for clean energy are strong, but the absence of any tax support for energy storage, offshore wind, solar power and electric vehicles risks hindering the ability of these needed technologies to scale up at the pace necessary to protect people and wildlife from climate catastrophe.”

The offshore wind industry and climate groups had been hoping that the tax policy bundle would include a five-year extension of the investment tax credit to support the construction of wind farms offshore along with an extension of the production tax credit for land-based wind energy. The tax credit is thought to be a lynchpin of the financing for offshore wind projects.

The spending bills — approved by the House on Tuesday and expected to be passed by the Senate by the end of the week — include a one-year extension of the production tax credit largely utilized by land-based wind projects, but not the offshore-centric tax incentive. The credit had been due to expire at the end of the year, but that sunset date would be extended to Jan. 1, 2021, as long as the Senate goes along with the bill, as it is expected to do to avoid a government shutdown.

US Rep. Richard Neal’s Ways and Means Committee was among the parties involved in the deliberations over the tax extender package. His office said that an offshore wind extension was in the bill text as of 8 p.m. Monday, but was pulled at the last minute based on a request from the White House.

The American Council on Renewable Energy (ACORE) said the extenders package represented “a squandered opportunity.”

“While ACORE supports the modest extensions in the package, they will do little for renewable growth and next to nothing to address climate change. Given bipartisan support for tax incentives for energy storage, offshore wind, electric vehicles, and other critical clean energy priorities, this outcome is deeply disappointing. This is not the time to be kicking the climate can down the road,” Gregory Wetstone, president and CEO of ACORE, said.

Though the House did not directly address offshore wind in its $1.4 trillion pair of spending bills, industry watchers said offshore projects might still be able to take advantage of the one-year extension of the production tax credit.

The Internal Revenue Service allows developers to treat certain projects that qualify for the production tax credit as “energy property” and then elect to claim the investment tax credit for that project instead, essentially using the production credit as a pass-through to get to the investment tax credit.

So while the House’s tax package did not include an enhanced tax credit or special treatment for offshore wind, those developers will still be able to access federal tax benefits since the production tax credit was extended for a year.

The American Wind Energy Association said an offshore wind project that commences construction in 2020 — as the stalled Vineyard Wind I project hopes to do — could elect to take the 60 percent production tax credit or an equivalent investment tax credit, which would work out to roughly 18 percent. An 18 percent investment tax credit would equal the credit’s value for projects that begin construction in 2018 and is a more significant benefit than the 12 percent credit available to projects that began construction this year.

Though the offshore wind-specific tax credit was not included in the most recent spending bill, it is part of a standalone bill introduced in draft form last month by Neal’s Ways and Means Committee. The status of that bill remains unclear, though Democrats who worked to craft the bill have said they hope to file it and get to a hearing early in 2020.

At the state level, House Speaker Pro Tempore Patricia Haddad filed a bill (H 2487) that would create a commission to review how the loss of the federal tax credit would affect the offshore wind industry in Massachusetts as well as “policies and programs that could alleviate any negative impacts.” The bill has had a hearing and is pending before the Joint Committee on Revenue.

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