According to the titular song from the Rodgers and Hammerstein musical, Oklahoma is where the wind comes sweeping down the plain. Unfortunately for energy producers hoping to levy that fabled wind into tax credits, wind incentives may soon be coming to an end in Oklahoma.
The Oklahoma House recently passed S.B. 498, which would disqualify wind producers from a property tax exemption for manufacturing facilities as of 2016. What’s interesting is the proposed bill does not limit the exemption in general or affect several industries, but is specifically targeted towards wind producers.
This is not the first time that wind incentives have been scaled back in Oklahoma. An income tax credit for manufacturers of small wind turbines sunset in 2012. However, wind producers in Oklahoma may still qualify for a credit for taxpayers who generate electricity through zero emissions facilities, at a rate of $0.0050 per kilowatt-hour of energy produced.
Meanwhile, in Texas, wind incentives are also in danger, according to the Star-Telegram. Texas currently leads the nation in wind production and many legislators feel that the wind industry no longer needs the wind energy incentives. Texas has statutorily mandated renewable energy goals and S.B. 931, which recently passed the Texas Senate, will end those goals as of Dec. 31, 2015. The bill would also end the Competitive Renewal Energy Zone (CREZ) program, which was responsible for creating much of the infrastructure necessary to establish the wind industry in Texas.
Last year, the Texas Comptroller issued the Texas Power Challenge report, which called for an end to tax credits for the wind industry and called into question the continued need for the CREZ program. The report’s main point is that the wind industry in Texas has reached a maturation point and that “[i]t is time for the wind energy industry to stand on its own feet.”
Texas wind producers are able to claim wind energy incentives in the form of credits and property tax limitations under the Texas Economic Development Act (TEDA). Although incentives granted under TEDA are not exclusive to the wind industry, over half of the companies claiming incentives produce wind energy, according to the report.
All of this follows in the wake of the expiration of the federal Production Tax Credit, which previously expired at the end of 2013. It was then revived in December 2014, but only for a period of two weeks: until the end of 2014, according to Bloomberg Politics. While the federal credit was extended through 2014, companies were reluctant to undertake new wind construction during this time, according to The Desert Sun.
But it is not all bad news for renewable energy. At least one state is considering an increase in wind tax credits. Nebraska is considering L.B. 423, which would create a renewable energy tax credit, according to the Omaha World-Herald.
The proposed Nebraska renewable energy credit would be available to energy producers using wind, solar, biomass or landfill gas. Renewable energy producers would be able to choose between a one-time credit equal to 30 percent of the cost of construction of a renewable energy facility, up to a maximum of $2 million, or a credit for each kilowatt-hour of electricity generated during the first ten years of operation, starting at 1 cent per kilowatt-hour for the first two years of operation, with a gradual reduction to 0.6 cents per kilowatt-hour for the last two years of eligibility.
Although the renewable energy industry may be suffering some temporary setbacks in terms of tax incentives, there is still a trend towards using renewable energy worldwide. Renewable energy capacity is increasing at a faster rate than fossil fuel capacity and that rate is predicted to steadily increase, according to Bloomberg Business. Even if it’s not a breeze, it seems that the wind turbines will keep on turning.
Continue the discussion on LinkedIn: Does the wind industry still need tax credits in order to compete?
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