Wind-power producers are rushing to take advantage of a green energy tax credit extended by Congress—and, in a new twist, many are using it to renovate existing wind farms, not just build new ones.
The Production Tax Credit, which was renewed by lawmakers last December, allows qualifying wind farms to reap tax benefits based on their output for a 10-year period. The credits, which can be shared with investment partners, reduce federal tax bills.
Some wind producers, encouraged by turbine makers, are deciding to “repower” existing wind farms to tap the tax credits, including NextEra Energy Inc., which has 110 wind farms in 19 states and Canada. NextEra reaped $73 million in Production Tax Credit subsidies in the first six months of the year.
Armando Pimentel, chief executive of NextEra Energy Resources, the company arm that develops renewable power, recently told investors that while retrofitting “certainly wasn’t something we were thinking about six months ago,” he believes it may now make sense for nearly a third of the company’s 13,000-megawatt wind portfolio.
In rough numbers, a 100-megawatt project with modern turbines and strong winds might produce $10 million a year in tax credits, according to an analysis by Fitch, the credit rating firm. The current government credit is 2.3 cents per kilowatt-hour of electricity produced, but it is adjusted for inflation and has jumped 53% since it began in 1992.
Upgrading wind farms makes sense for wind producers because modern turbines generate far more electricity than those built two or three decades ago. That means some existing wind farms will get overhauled to generate more renewable power, while others will produce the same amount of electricity but with fewer turbines.
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