OffshoreWindDC Board Sets Two Major Legislative Priorities – Extension of the Investment Tax Credit and Restoration of the DOE Loan Guarantee Program (May 2011)
Extension of the Investment Tax Credit
Extension of the “placed-in-service” date applicable to the ITC for offshore wind energy facilities is one of OffshoreWindDC’s two major legislative priorities. The ITC is the most fundamental federal tax incentive for renewable energy. The ITC imposes a strict deadline of December 31, 2012 for wind farms to qualify, whether onshore or offshore. This is in sharp contrast to the placed-in-service dates for all other renewable energy projects, which range from 2013 for marine and hydrokinetic facilities, biomass, geothermal, municipal solid waste and qualified hydropower to 2016 for solar energy projects. Although the 2012 deadline may create some difficulties for onshore wind, it imposes a near impossible barrier for offshore wind due to the long development timelines. In its current form, the ITC may not be available to any of the projects being developed and permitted off the Atlantic Coast or in the Great Lakes.
The lack of a long-term ITC will make it very difficult to finance offshore wind projects and will thwart development of an enormous indigenous offshore wind resource, one that the DOE estimates could reach 54 GW by 2030. 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. Thus, OffshoreWindDC strongly supports an ITC extension to at least 2016, the date that currently applies to solar facilities. Such an extension will signal the markets that projects can be developed and financed.
Restoration of the DOE Loan Guarantee Program
The US DOE Loan Guarantee program for renewable energy projects was established when the Energy Policy Act of 2005 was enacted into law. The loan program exists to support debt financing for innovative energy projects, including first-mover offshore wind farms. Recent Congressional action on a Continuing Resolution (CR) for fiscal year 2011 has essentially eliminated funding for these loan guarantees for our members’ projects. This presents a significant problem for offshore wind developers, since federal loan guarantees significantly lower the cost of borrowing funds for an offshore wind farm.
An additional aspect of the loan guarantee program, provided for in the 2009 Recovery Act, had been its funding of a credit subsidy fee, which would otherwise have to be paid by an offshore wind developer at the loan closing. This credit subsidy payment provided for by the Recovery Act would have required offshore wind developers to reach loan closing by September 2011, an unrealistic date considering the current federal permitting process timeline.
OffshoreWindDC’s Board of Directors has voted to support a comprehensive, industry-wide effort to have the DOE Loan Guarantees restored for offshore wind farms and to ensure that the credit subsidy fee provision become available to offshore wind developers.
