Institutional - Wind Energy: Renewable Energy and the Environment - page 230

tax if they plan on new coal plants. In other words, their opinion is that the shareholders and not the
consumers should take the risk.
Education is public awareness of the possibilities or options, a realistic cost/benefit comparison
over the lifetime of the energy systems. Remember, you cannot fool mother nature and you will pay
one way or another.
Politics will continue to influence which and how many different energy sources are subsidized.
Present policies include a tax or limitation on greenhouse gas emissions, rebates on equipment or
incentives for electrical energy produced from renewable energy, Renewable Portfolio Standards,
set prices for renewable energy, and tax credits.

11.6 INCENTIVES
Energy subsidies have serious effects, generally in favor of conventional fossil fuels and established
energy producers. Subsidies for renewable energy between 1974 and 2000 amounted to over $20
billion worldwide. This compares with the $300 billion per year to conventional energy sources, not
even taking into account expenditures for infrastructure, safeguards, and military actions [31]. The
privatization of the electric industry along with the restructuring into generation, transmission, and
distribution has opened some doors for renewable energy.

11.6.1 U NITED S TATES
The major impetus to the wind industry was due to the federal tax credits, the National Energy Act
of 1978, and the avoided costs set by the California Public Utilities Commission. The federal tax
credits for wind turbines were available from 1980 to 1985. For small systems for personal use, the
tax credits were 40% of the cost, up to a maximum of $4,000. For a business, the tax credits were
25% off the bottom line. During this period, tax shelters for California wind farms were the primary
method of financing.
A part of the National Energy Strategy Act of 1992 provided a $0.015/kWh incentive for pro-
duction of electricity by wind energy. An investor can claim the production tax credit (PTC) under
Section 45 of the IRS Code [32]. The provisions are:

r The investor owns the wind facility, which is placed in service during the period December 31,

1993 to July 1, 1999.
The investor produces the electricity at the wind facility. r

r The investor sells the electricity to an unrelated party.

The credit applies to production through the first 10 years of operation. The credit is intended to
serve not only as a price incentive, but also as a price support. The credit is phased out as the aver-
age national price exceeds $0.08/kWh, based on the average price paid during the previous year for
contracts entered into after 1989. Both values will be adjusted for inflation. The credit can be carried
back for 3 years and carried forward for 15 years to offset taxes on income in the other years. The
PTC was extended several times, now through 2009.
There was a provision of direct payment, Renewable Energy Production Incentive, to public
utilities, co-ops, and Indian tribes, which is equivalent to the PTC. The problem is that Congress
has to fund it every year, the amount of funds may be less than requested, and wind projects have to
compete with other renewable projects.
The federal government continues to support wind energy through the Department of Energy
budget for Energy Efficiency and Renewable Energy [33]. As always, the budget for renewable
energy is less than the budget for nuclear energy. In 1973, the amount for wind was $300,000,
and that increased steadily to $67 million in 1980. During Reagan's term, that was reduced every
year, and in 1988 the amount budgeted was $8 million. Since then there have been increases and