Investors weigh in on US renewables support
Washington, 6 March: Leading investors have added their voices to the growing chorus of concern about the extension of key renewable energy tax breaks in the US. They have warned that investors will seek more attractive and predictable returns abroad, putting US jobs at risk, if Congress fails to extend the Production Tax Credit (PTC) and the Investment Tax Credit (ITC).

“In the absence of a long-term extension of the PTC and the ITC, the [renewable energy] industry in this country will come to a virtual standstill,” Nancy Floyd, managing director of Nth Power, a leading clean energy venture capital company, told reporters at the Washington International Renewable Energy Conference on Tuesday. Congress risks “dealing a fatal blow to a burgeoning industry,” she added.

“We’ve seen this movie before, when the PTC has lapsed,” said Kevin Walsh, managing director and head of renewable energy investing at GE Financial Services, which has invested $3 billion in renewables. “The impact on wind and solar is dramatic – 70-90% stops immediately.”

Last year was a record one for the industry, with some 5GW of new capacity installed in the US, representing 30% of all new installed electricity generating capacity in the country, and bringing total renewables capacity to 17GW.

This dramatic increase in capacity has been underpinned by the PTC, which is worth $0.019/kWh for wind energy generation. The credit is periodically extended by Congress, although it was allowed to lapse for 10 months at the end of 2003, decimating renewable energy growth in 2004.

The latest extension is due to expire at the end of 2008. Recent efforts to add an extension to bills before Congress have failed.

The ITC is also at risk of lapsing. It provides an upfront incentive to invest in less advanced technologies, such as solar or fuel cells.

John Cavalier, vice-chairman of investment bank Credit Suisse, noted that analysts expect an additional 43GW of renewables to be installed in the US by 2015, which represents a capital investment of $90 billion.

“We’ll see an exit from the business of lending to wind projects as early as May this year,” without a PTC extension, he said, given the lead time in financing the plants.

Despite the bipartisan support for a PTC extension, recent efforts have tied the tax credit to the removal of tax breaks for the oil industry. John Geesman, co-chair of the American Council on Renewable Energy, which convened the investors, said there has been “an inadequate focus from the legislative branch and the executive branch” on the issue.