Utility Dive: Treasury Department offers wind industry coronavirus lifeline with proposed safe harbor extension
The U.S. Department of the Treasury last week indicated it would move toward extending safe harbor deadlines for wind projects to fully benefit from federal tax credits in response to a letter from a bipartisan group of senators urging the department to act.
The department "plans to modify the relevant rules in the near future," Principal Deputy Assistant Secretary Frederick Vaughan wrote in a May 7 letter to Sen. Chuck Grassley, R-Iowa, who chairs the Senate Committee on Finance. Grassley and five other Senators, including Chair of the Senate Energy and Natural Resources Committee Lisa Murkowski, R-Alaska, and ranking member Joe Manchin, D-W.Va, in April wrote to the Treasury requesting such an extension.
Wind developers across the country say the move is critical to ensuring projects don't lose critical financing as the production tax credit (PTC) winds down. The letter is a "positive signal" that the administration will act, Gregory Jenner, former Acting and Deputy Assistant Secretary for Tax Policy under the Department of Treasury told Utility Dive.
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In order to qualify for the investment tax credit (ITC) or the PTC, project developers must meet certain construction deadlines that will ensure those projects are able to secure the financing they need. But supply chain disruptions, worker shortages and other COVID-19-related factors have posed critical delays to renewables projects, leaving potentially billions of dollars in investment at risk.
Last week's letter addressed directly to Grassley is "pretty telling" that the department is likely to act on this issue in the way senators asked, said Jenner, who is now a partner at Stoel Rives.
"They could have said something as innocuous as 'Thank you for your letter, we're looking at the issue.' … [But] remember, they're sending this to Grassley in particular. That's very important. They're not going to jerk him around."
The Treasury itself created the four-year mechanism for incentivizing renewables projects to support the industry, which winds down at the end of this year, making it all the more likely they would support an extension, said Jenner.
"I can think of no substantive reason that Treasury would not extend this deadline," he said.
The Senators' letter asks the department to extend safe harbor guidelines for the PTC and the ITC from four to five years in order to avoid expiration at the end of 2020.
"Providing a temporary extension of the continuity safe harbor of five years, in lieu of the current four, would address the unforeseen interruptions developers are experiencing due to COVID-19 and provide the certainty businesses need to move forward with existing projects," the senators wrote in their letter.
The changes are anticipated to mostly impact the wind industry. The American Wind Energy Association (AWEA) estimates COVID-19-related delays have put 25 GW or $35 billion in wind project investments at risk, along with 35,000 jobs.
"We appreciate the Department of the Treasury's indication that it will update guidance to address wind energy challenges caused by COVID-19 and we look forward to reading the important details. We also are grateful to Senators Grassley, Wyden, Murkowski, Manchin, Thune and Cantwell for the letter that they sent to Treasury explaining the importance of this action," Amy Farrell, AWEA senior vice president of government and public affairs said in a statement.
Source: Utility Dive