Effect of tax and production incentives on wind projects
Only the most cost-efficient wind developers can hope to prevail in today`s competitive environment. The economics of each project must therefore be carefully analyzed to determine the development`s price accurately and to set power rates competitively. The conference planners asked me to discuss the status and impact of the production tax credits. I have taken some liberty to widen the discussion to include the depreciation as well as the tax credit effect on wind project, because depreciation tax savings are a significant factor. I have also broadened my discussion to cover the U.S. Department of Energy`s production incentive payment program which Congress intended as the counterpart of the tax credit for tax-exempt municipal utilities. First, for the tax incentives, and, second, for the USDOE production incentive program, this paper will: (1) Outline the statutory provisions; (2) explain their financial impact; and (3) describe the chief issues. Lastly, this paper will discuss the administrative ruling procedure for advance clearance. I should stress at the outset that these incentives cannot make an uneconomic transaction economical. A wind project must be able to stand on its own financially. The tax incentives are subject to the passive loss limitations; this means that a windfarm investment cannot be used as a tax shelter to offset other types of income. The partnership anti-abuse rules also apply to abusive structures. Congress, nevertheless, designed the tax incentives to give wind-generated electricity an enhanced rate of return so as to better compete with conventionally generated electricity.
- Research Organization:
- American Wind Energy Association, Washington, DC (United States)
- OSTI ID:
- 269348
- Report Number(s):
- CONF-950309-; ON: DE96011159; TRN: 96:003988-0011
- Resource Relation:
- Conference: 25. annual conference and exhibition on wind power, Washington, DC (United States), 26-30 Mar 1995; Other Information: PBD: 1995; Related Information: Is Part Of Windpower `95 - Proceedings of the American Wind Energy Association; PB: 624 p.
- Country of Publication:
- United States
- Language:
- English
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