House Republicans’ proposed tax plan includes a provision that would scale back a generous federal tax credit for wind energy, but the developer of LIPA’s South Fork offshore wind farm says the prospect of a reduction won’t affect its plans.
The tax bill would cut the so-called production tax credit for wind energy by more than a third, making it more difficult for projects under construction to qualify, Bloomberg News reported.
In a statement, Deepwater Wind, which is proposing a 90-megawatt wind farm off the Rhode Island coast for LIPA by 2022, said it would “monitor” tax credit proposals in Congress and “ensure that the South Fork Wind Farm complies with any changes to the requirements.”
Jeff Grybowski, chief executive of Deepwater Wind, the Providence-based developer of the proposed $1.62 billion project, said the company still hasn’t decided which federal subsidy it would apply for for the South Shore wind farm project. There are two options, a production tax credit and an investment tax credit — and both provide millions of dollars in federal tax credits to sharply defray system costs.
“It is obviously to our benefit to qualify the project” for the credits, Grybowski said. “Our financial assumptions are based on the project qualifying. It requires a lot of planning and thought.”
Grybowski said that while he expects the company to maximize any federal credits, he pointed out that the project is neither dependent on credits nor was LIPA exposed to any increased costs should the credits not be forthcoming.
“We bear all the risk,” he said.
At least three Republican members of Senate Finance Committee said they opposed House member’s plan to scale back the credit, Bloomberg reported, suggesting the wind measure faces obstacles in the Senate should it pass the House.
“There may be folks [in the Senate] who would like to follow the House approach, but I don’t think that’s what we are going to able to do over here,” South Dakota Sena. John Thune, the Senate’s No. 3 ranking Republican, told Bloomberg.
Grybowski said Deepwater won’t know “until the end” of construction, when the project is producing energy and applications are filed, which tax credits it will qualify or apply for. In Deepwater’s case, that means 2022.
The investment tax credit, which is also available to customers who put solar panels on their roofs, gives developers a tax credit for the value of the project. The tax credit reduces by 6 percent a year starting in 2016, meaning that it amounts to 24 percent for 2017, and 18 percent in 2018, expiring at the end of 2019.
Deepwater has said the all-in cost of its South Fork project was $740 million, so the discount for starting construction in 2017 could amount to upward of $177.6 million. It falls to $133 million next year. Grybowski said the credit would not apply to the transmission cable.