A one-year extension of a federal tax credit -- the product of this week's successful fiscal cliff negotiations -- is a big boost for the U.S. wind power industry, but the benefits may not be fully felt until 2014.
The production tax credit, which expired with the new year, was extended by Congress as part of the measure averting the fiscal cliff that threatened income tax increases for most U.S. workers. The tax credit will subsidize wind projects that start construction in 2013.
Separately, the bill restored tax credits for ethanol that's produced from non-food sources, such as corn stalks, and for biodiesel.
Many wind projects have been on hold, including 13 in Minnesota that have won state regulatory approval. Now that developers are assured of the tax credit, they can try to nail down financing and sign up buyers for their wind farms' electricity. But wind farm development probably won't pick up until the second half of the year, and may not see significant growth until 2014.
"Though too late for this year, it will allow the U.S. market to see some recovery in 2014," Justin Wu, Hong Kong-based head of wind analysis at Bloomberg New Energy Finance, said by e-mail.
Renewable Energy Group, which is spending $20 million to upgrade its biodiesel plant in Glenville, Minn., applauded the return of the $1-per-gallon biodiesel blending credit -- and so did investors. The stock rose 9 percent Wednesday to $6.39 per share.
"This tax credit provides certainty for our petroleum distributor customers and, in turn, market stability for commercial biodiesel producers like us," the Ames, Iowa-based company said in a statement.
Dan Juhl, CEO of Juhl Wind Inc., a publicly traded renewable energy developer based in Pipestone, Minn., said his company has three wind farms proposed in other states that have been on hold, and he hopes they now can move ahead.
"Obviously, the extension makes it all finance-able," Juhl said in an interview Wednesday. "It will get us through another year."
But Juhl said the one-year extension doesn't address how the United States intends to subsidize energy development in the long term -- or whether energy development should get any government help. He said the debate has highlighted that the oil and gas industry gets special federal tax breaks and that nuclear power plants have federal protection from catastrophic liability. Juhl shares closed at 44 cents, down 11 cents, or 20 percent on Wednesday.
The wind industry, warning that 37,000 jobs were at stake, had lobbied for an extension of the credit. The United States installed an estimated 11,800 megawatts of turbines in 2012, but that could fall to 4,800 megawatts in 2013, according to Bloomberg New Energy Finance.
Wind farm developers raced to complete construction and generate power by Dec. 31 to qualify for the expiring tax credit of 2.2 cents a kilowatt hour. Under the extended tax credit, new wind farms must start construction -- rather than finish --in 2013 to qualify for the tax credit. The bill allows a 30 percent investment tax credit up front for community wind projects as an alternative to 10 years of the 2.2-cents-per-kilowatt credit.
"Now we can continue to provide America with more clean, affordable, homegrown energy, and keep growing a new manufacturing sector that's now making nearly 70 percent of our wind turbines in the U.S.," said Rob Gramlich, who on Wednesday became interim chief executive officer of American Wind Energy Association, a Washington-based trade group.
Staff writer David Shaffer contributed to this report.