New Offshore Wind Energy Incentives Announced
May 25, 2017
On May 11, Sens. Edward J. Markey (D-Mass.), Sheldon Whitehouse (D-R.I.), and Rep Jim Langevin (D-R.I.-2) announced the “Offshore Wind Incentives for New Development Act” or the “Offshore WIND Act.” If passed, the Offshore WIND Act would extend the 30 percent investment tax credit (ITC) under Section 48 of the Internal Revenue Code for offshore wind projects that undergo construction before January 1, 2026. The Offshore WIND Act is co-sponsored by Sens. Jeff Merkley (D-Ore.), Elizabeth Warren (D-Mass.), Jack Reed (D-R.I.), Cory Booker (D-N.J.), and Sherrod Brown (D-Ohio). A number of stakeholders also support the bill, including but not limited to: the League of Conservation Voters, NRDC, Environment America, Sierra Club, Oceana, Union of Concerned Scientists, Mass Audubon, and the Conservation Law Foundation. On the same day the legislation was announced, the Maryland Public Service Commission authorized two offshore wind projects with a combined capacity of 368 MW and awarded offshore wind renewable energy credits to U.S. Wind Inc. and Skipjack Offshore Energy LLC. The authorization of these projects is a sign that offshore wind is taking a step in the right direction. Still, the offshore wind industry still faces obstacles.
A 2015 bill extended the Production Tax Credit (PTC) and ITC for wind until 2019. Under this current law, offshore wind projects are eligible for the PTC under the Internal Revenue Code if construction of the project begins before January 1, 2020. In order to be eligible for 100 percent of the PTC (which is $0.024 per kWh for 2017), however, a project must have begun before January 1, 2017. The credit for wind projects that begin after January 1, 2017, January 1, 2018, and January 1, 2019 decreases by 20 percent, 40 percent, and 60 percent respectively. Credits for the ITC decrease in a similar manner. Offshore wind farms are difficult to take a long time to plan and develop. For example, the first offshore wind project, developed by Deepwater Wind near Block Island, Rhode Island, began operations in December 2016 after being initiated nine years ago. As a result, no more offshore wind projects can qualify for these tax credits before they expire. With this in mind, the Offshore WIND Act is designed to make it possible for additional offshore wind projects to take advantage of the ITC.