In February, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA), perhaps better known simply as the stimulus bill. While the stimulus package includes a variety of conventional strategies to stimulate broad economic growth, the package also outlines a number of policies focused on stimulating emerging 21st century industries. Most notably for the wind industry, Obama’s stimulus package was drafted with a principle goal of doubling America’s renewable energy output in the next three years. The stimulus plan includes both funding and tax credit provisions that are intended to promote such growth.

The most direct provisions, and those that will likely have the greatest impact on wind energy development, are the changes to the tax credit provisions. The Production Tax Credit (PTC) has helped make the wind energy a lucrative industry for institutional investors who buy turbines and fund the construction of wind farms. The PTC reduces the investors’ tax liability by 2.1 cents/kWh produced each year for ten years. In recent years, the PTC has been extended for one year at a time, creating uncertainty near year’s end about whether the Congress would extend the credit for the following year. The three-year extension passed in the ARRA will reduce uncertainty and encourage stability and continued growth in the wind industry.

The ARRA also added wind energy developments onto the list of renewable energy developments that qualify for the Investment Tax Credit (ITC). Unlike the PTC, the ITC depends not on how much energy is produced by a wind farm, but on how much money was invested in it. The ITC reduces an investor’s tax liability by 30% of the investment in the wind energy facility and can be claimed immediately after the project starts operating.

Finally, the stimulus package added a provision to allow investors in renewable energy to convert their Investment Tax Credit into a grant. Instead of reducing tax liability, the grant (30% of the total investment, as for the ITC) will simply be disbursed after the project starts producing and delivering electricity. With a guaranteed 30% rebate on the investment as soon as wind turbines start operating, this grant provision should increase interest in wind energy development in the United States.

Less direct provisions of the American Recovery and Reinvestment Act will also have strong impacts on wind energy development. The Act pumps over $11 billion into funding and loan guarantees for electrical transmission projects that will increase both the efficiency and capacity of transmission across the country. The bulk of the funding will go to Smart Grid projects and projects that are being built specifically for the transmission of electricity from renewable sources. A fair share of the renewable energy related funding will also go towards the development of jobs and the training of new workers. Overall, the stimulus bill is expected to foster continued growth in the renewable energy industries despite the hard times being felt across most economic sectors.

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