Renewable energy producers are likely to get an extension to complete new projects and potentially receive federal tax credits in return since many have been delayed due to the COVID-19 pandemic.
Six U.S. senators on both sides of the aisle late last month sent a letter to U.S. Treasury Secretary Steven Mnuchin asking the department to extend the “continuity safe harbor” for both the production tax credit (PTC) and energy investment tax credit (ITC), from four years to five years for projects that started construction in 2016 or 2017.
“In addition to its severe toll on human lives, the COVID-19 crisis has disrupted supply chains, construction operations and permitting timelines, delaying projects otherwise on track to be in operation by the end of 2020,” the senators wrote. “While existing IRS guidance provides certain exceptions for specified setbacks in construction, these exceptions do not anticipate nor fully capture the wide-ranging interruptions now faced by developers.”
“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,” they wrote.
The six senators signing the letter were Senate Finance Committee Chairman Chuck Grassley (R-Iowa), Ranking Member Ron Wyden (D-Ore.), Sens. John Thune (R-S.D.), Maria Cantwell (D-Wash.), Senate Energy and Natural Resources Committee Chairman Lisa Murkowski (R-Alaska) and Ranking Member Joe Manchin (D-W.Va.).
In response, Treasury Principal Deputy Assistant Secretary Frederick Vaughan on May 7 sent a letter to Charles Grassley, chairman on the Committee of Finance, and wrote the department “appreciates your concern and plans to modify the relevant rules in the near future.”
Industry groups were encouraged by Vaughan’s response.
“Extending these deadlines would be immensely helpful as the renewable sector has been hit hard these last couple of months by supply chain disruptions, shelter-in-place orders and other significant pandemic-related delays,” Gregory Wetstone, president and CEO of the American Council on Renewable Energy, wrote in a statement on the group’s website.
“We look forward to further detail on this critical issue, and extend our appreciation to the Treasury Department for their work in this area, which can help the renewable sector continue as a key economic driver through this downturn, and an effective climate solution over the long haul,” Wetstone wrote.
The American Wind Energy Association estimates delays due to the pandemic have put 25 Gigawatt, or $35 billion in wind, project investments at risk—not to mention 35,000 jobs, according to Utility Dive.