Extension of PTC and ITC Could Bring Some Renewable Energy Projects Back from the Dead

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The recent extension of the federal Production Tax Credit (PTC) and Investment Tax Credit (ITC) will give renewable energy developers additional time to negotiate power purchase agreements, order equipment and line up financing. That's good news, because there's a full pipeline of active projects scheduled to kick off over the next few years. But the extension of those tax credits may be even more warmly welcomed by developers who have had their projects cancelled or placed on hold. The availability of tax credits through 2020 would enhance the economic viability of many projects, and could bring some back from the dead.

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Last month Congress passed, and President Barack Obama signed, an omnibus tax and spending bill that extended both the PTC, for wind power, and the ITC, which primarily applies to solar power. Both tax credits were extended for five years. Projects that begin construction before yearend 2020 would be eligible for tax credits on a sliding scale that incents developers to begin construction sooner rather than later. For more information on the tax-credit extensions, see December 21, 2015, article -- Renewable, Alternative Energy Industries Cheer Extensions of Tax Credits.

Industrial Info is tracking 736 U.S. wind and solar power projects actively being developed, with total investment value (TIV) of about $211.3 billion. These projects are scheduled to begin construction in 2016 and beyond. The regions with the greatest level of project activity are the Southwest, Rocky Mountains, Midwest and West Coast. By fuel type, companies are developing about $161.1 billion of wind projects and $45.7 billion of solar projects.

Click on the icons at right to see a chart showing the most active regions for renewable power development, and a breakdown of those projects by fuel type.

Construction kickoffs are expected to be especially heavy in 2016 and 2017, according to Industrial Info's project data. This year, developers are scheduled to begin turning dirt on 269 renewable generation projects collectively valued at $59.3 billion. Developers are scheduled to begin construction on 220 projects next year, valued at approximately $66.85 billion.

Click the icon at right to see a pie chart summarizing scheduled renewable energy construction kick-off dates.

Industrial Info does not expect all of these projects will keep their scheduled construction kick-off dates. Based on historical averages, we expect about 33% of renewable energy projects will begin construction according to their schedule.

Among active projects, 75 already are under construction. Those projects have a TIV of about $18.5 billion. Another 140 projects, valued at about $28.5 billion, are in the engineering phrase. And 532 other projects valued at about $167 billion, are still in the planning phase.

Click on the icon at right to see a breakdown, by PEC stage, of renewable energy projects that are still being actively developed.

While developers of active renewable energy projects cheered the five-year extension of the PTC and the ITC, developers of projects that had been cancelled or placed on hold may have even more reason to cheer the tax-credit extensions. Over 700 wind or solar energy projects scheduled to kick off between 2014 and 2018 have been cancelled or placed on hold, according to Industrial Info's North American Industrial Project Database. The aggregate value of these projects is about $240 billion.

Windpower projects make up the lion's share of projects that have been cancelled or deferred: 578 projects valued at $198 billion. Solar projects that have been cancelled or placed on hold number 142, with aggregate TIV of about $42 billion.

Click on the icon at right to see project cancellations and deferrals on a year-by year basis and according to fuel type.

How many inactive projects developers will be able to reactivate depends on a variety of factors, including market demand as well as the ability to sign a power purchase agreement, secure equipment and line up financing.

"The extensions of the federal PTC and ITC likely will spur additional tens of billions of renewable energy project activity, both for projects still being actively developed as well as for projects that had been cancelled or deferred," said Britt Burt, vice president of research for the global Power Industry. "President Obama's Clean Power Plan envisions the closure of numerous coal-fired power plants and the construction of numerous renewable energy projects."

"While the extension of the PTC and the ITC will help the economic viability of renewable power projects, another factor affecting the future demand for renewable energy is state renewable portfolio standards (RPS)," Burt continued. "There is no federal RPS, but about 30 states have mandated that a certain portion of their state's electricity must come from renewable energy by specific dates. Utilities have made good progress in meeting these requirements, which has slowed the pace of renewable power development in the last year or two. But if more states follow California's lead and expand their RPS, demand for renewable energy likely would increase."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.