NEW YORK (TheStreet) -- A new piece of legislation on the docket could alter the financial dynamics of the nascent wind power industry -- and affect the results at other blue-chip companies like Google (GOOGL) and Microsoft (MSFT), too.
Rep. Kenny Marchant (R-Texas) has just introduced legislation known as The PTC Elimination Act, striking the statutory language for the primary federal handout for the wind industry from the U.S. tax code and provides that the PTC should expire as of December 31, 2014 and not be extended in the future or retroactively. What that means is that wind power companies will stop receiving as much tax relief as they currently enjoy.
As background, wind energy companies have heavily relied upon a government construct known as the "Production Tax Credit" (PTC) to support their bottom lines. For confirmation, we have to look no further than Sempra Energy's (SRE) 2014 annual report in which we find the following statement, "For each of the years ended December 31, 2014, 2013 and 2012, PTCs represented a large portion of our wind farm earnings, often exceeding earnings from operations."
Under the PTC, a clean technology facility receives a tax credit for 10 years after the date the facility is placed in service, with the tax credit amount ranging from $0.23 per kilowatt-hour (kWh) for wind to $0.011 per kWh for qualified hydroelectric. On its face, that may seem reasonable, but looking at the International Journal of Sustainable Manufacturing, researchers concluded that "in terms of cumulative energy payback, or the time to produce the amount of energy required of production and installation, a wind turbine with a working life of 20 years will offer a net benefit within five to eight months of being brought online." In other words, according to the report, the supportive subsidy is paid far, far longer than is necessary.