Community Wind Handbook/Know Policies Incentives
Know the Effects of Policies & Incentives
Policies and incentives are important drivers in lowering the cost of large community wind projects. In 2014, the capacity-weighted average installed project cost for utility-scale projects was $1,710/kilowatt.
One of the primary drivers of wind projects has been the Production Tax Credit (PTC), an inflation-adjusted federal incentive that projects can utilize during the first 10 years of production. Large corporations with significant passive income are usually the only entities with the tax liability to utilize the credit.
The PTC dictates that wind project owners must materially participate in a wind development, and credits cannot be applied against income from other active businesses, wage income, or interest and dividend income. Also note that the PTC amount for an individual project is dependent on other federal or state funding, such as U.S. Department of Agriculture Rural Energy for America Program grants.
Many states provide tax incentives that large community wind projects can qualify for, including a corporate income tax credit, property tax abatements or exemptions, sales tax exemptions, or a performance incentive similar to the PTC. The Database of State Incentives for Renewables & Efficiency (DSIRE) contains summaries of state incentives.
Many states have begun to require the purchase of wind energy in the form of a mandate often referred to as a renewable portfolio standard (RPS).
State RPS policies are considered to be one of the primary drivers of renewable energy capacity in the United States. However, some states have exceeded requirements and utilities have added new electric generation capacity, primarily in the form of wind energy, due to its low cost compared to traditional alternatives.