CREZ and the PTC

The most recent indications are that the transmission lines for the Competitive Renewable Energy Zones (CREZ) in the Texas Panhandle and the South Plains will be energized in the fourth quarter of 2013.  It seems reasonable to expect that wind farm developers will time the commercial operation date of their wind projects to coincide with the availability of the transmission lines (or shortly thereafter).

Wind energy development, like other forms of conventional and renewable energy, rely on federal incentive programs.  At this point, I believe most people expect that the following, which are scheduled to expire at the end of 2012, will not be renewed or extended:

  • grant program (Section 1603);
  • loan guarantee program (Section 1705); and
  • bonus depreciation.

In addition to the foregoing, the Production Tax Credit (PTC) is scheduled to expire for wind projects at the end of 2012.  The PTC provides a 2.2 cent per kilowatt-hour (kWh) benefit for the first ten years of a wind farm’s operation.  Contrary to the above, many people believe (“hope” may be a better word) that the PTC will be extended.

History has shown a dramatic decrease in wind energy development when the PTC is either allowed to expire or is not extended far enough in advance to allow developers to continue to plan development.   I would postulate that “far enough in advance” in the world of wind energy development is at least 12 months and probably more like 18 months.

Considering the timing of the expiration of the federal incentive programs, and specifically the PTC, one has to wonder how the wind projects that feed the CREZ transmission lines will be impacted.   Without the incentives, a pricing structure would be necessary to encourage developers to build and operate the wind farms.

Now is the time that we need Congress to act to extend the PTC and continue our investment in renewable energy.  Without Congressional action, wind energy development could be at a crawl by the time the CREZ lines are completed.

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author’s law firm or its individual partners.