TABLE 2.1 Legislation of Production Tax Credits for Wind Energy in the United States

Date of Legislation

In-service Dates

1992 Energy Policy Act

1994-June 30, 1999

PTC lapsed

June 30, 1999-December 1999

December 1999

2000-2001

PTC lapsed

January 2002-February 2002

February 2002

2002-2003

PTC lapsed

January 2004-October 2004

October 2004

2004 (retroactive)-2005

August 2005

2006-2007

December 2006

2008

SOURCE: Courtesy of American Wind Energy Association.

The intermittent nature of the PTC has retarded both the installation of wind capacity in the United States and the development of the wind energy industry in the United States. Figure 2.1 shows annual additions of wind power in the United States, with telling decreases in installations in 2000, 2002, and 2004, following the expiration of the PTC in 1999, 2001, and 2003. More significantly, in recent years (2005 and 2006) the PTC has been extended before it expired, and steady growth in wind capacity additions is anticipated during the now authorized 2005-2008 period.

Although the impact of the PTC lapses on installation of wind capacity can easily be seen in Figure 2.1, it is harder to evaluate directly the damage done to U.S. wind energy businesses. Many of the impacts of the boom-bust cycle are difficult to assess and even more difficult to value. Inefficiencies in production, costs of holding inventory, difficulties in managing supply chains, and costs associated with maintaining (or reducing) a workforce all represent very real, but hard-to-see, costs to a business trying to navigate the uncertain market illustrated in Figure 2.1. Furthermore, many companies may simply never have evaluated their losses, or even if these numbers were estimated, they are not generally available publicly.

ENTREPRENEURSHIP AS A FORCE FOR CHANGE

A free economy grows and adapts through competition, the “creative destruction” used by economist Joseph Schumpeter (1883-1950) to describe the industrial and societal transformations that accompany widespread innovation. The central participants in this innovation process include (1) established for-profit companies offering products and services pertinent to the energy transition; (2) new entrepreneurial ventures just emerging into the marketplace; and (3) investment institutions providing capital to both. Each has a unique role in the process of creative destruction, and transition policies must reach all three to motivate change and fully realize the opportunities for economic growth.

FIGURE 2.1 U.S. wind power capacity additions, 1999-2006. SOURCE: Courtesy of American Wind Energy Association.



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