off-site   To locate Public Law 107-147

A key federal policy that promotes the development of renewable energy is the energy production tax credit (PTC), which is specifically targeted to support electricity generated from wind, closed-loop biomass* sources, and poultry waste. The credit provides a 1.8 cent per kilowatt-hour benefit for the first ten years of a facility's operation. Congress allowed this tax credit to expire on December 31, 2001. In March of 2002, due to the efforts of UCS and other organizations, the credit was extended until December 31, 2003. The legislation also restored the credit retroactively so that facilities which started up during the short period after December 2001 and before March 2002 could use the credit.

The tax credit extension was included in a much larger piece of legislation, titled the "Job Creation and Worker Assistance Act of 2002." The President signed the bill (HR 3090) on March 9, 2002, and it became Public Law 107-147. It marks the second time that the PTC was allowed to expire by Congress. Originally enacted as part of the Energy Policy Act of 1992, the credit was first scheduled to sunset on June 30, 1999. In December of 1999, again due to the efforts of UCS and other organizations, the credit was extended until December 31, 2001.

The most recent temporary lapse in the PTC came on the heels of a record year in wind energy capacity growth. In 2001, the wind power industry added over 1,700 megawatts of capacity - a 66% annual increase and more than doubling the previous record year set in 1999. 

Extending the PTC through 2003 will allow the wind industry to continue building on last year's momentum, but it is insufficient for sustaining the long term growth of renewable energy. The planning and permitting process for new wind facilities can take up to 2 years or longer to complete. As a result, many renewable energy developers that depend on the PTC to improve a facility's cost effectiveness may hesitate to start a new project due to the uncertainty that the credit will still be available to them when the project is completed. 

UCS is advocating for the extension of the PTC through at least 2006. We are also advocating for an expansion of the tax credit to cover open-loop biomass** and cofiring of biomass in coal-fired facilities. In separate energy legislation passed in August 2001 and April 2002 respectively, both the U.S. House and Senate supported UCS's recommendations to extend the PTC through 2006 and expand eligibility to additional biomass sources.

Congressional conferees have been meeting since June 2002 to try and merge these comprehensive energy bills. UCS is working with our coalition partners and with the conferees to ensure that the PTC extension - as well as other important policies supporting energy efficiency and the development of clean, renewable energy - are included in the final legislation.

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*Closed-loop biomass: Plant matter that is grown for the sole purpose of being used to generate electricity. Due to the cost of developing a closed-loop facility to generate electricity, this tax credit has not been used to date.

**Open-loop biomass: Plant matter other than "closed-loop" biomass, to include crops and trees, forestry and wood waste, and agricultural waste. As advocated by UCS, the open-loop biomass definition would not include municipal waste, old growth forest biomass, painted and chemically treated wood waste.