Wind construction start rules criticized

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Publication August 9, 2018

The construction-start rules for wind farms are under attack from the coal lobby.

Senator Rand Paul (R-Kentucky) urged the US Treasury secretary in a letter in May to consider four ideas that would help offset the “unfair advantages” that he said wind has over coal.

One proposal is to accelerate the deadline to complete projects to qualify for federal tax credits. Wind farms had to be under construction by the end of 2016 to qualify for tax credits at the full rate. Projects that started construction in 2017 qualify at 80% of the full rate and in 2018 qualify for 60%. It is not enough merely to have started construction in time; there must also be continuous work on the project after the year in which construction starts. However, the IRS does not make developers prove such work on any project that is completed within four years. Paul wants to reduce the period to two years.

Many large wind companies stockpiled equipment as a basis for treating projects in which this equipment will be used as under construction in time to qualify for tax credits, but without knowing for sure in which projects the equipment will be used. Paul wants to bar the ability to shift equipment to a different project.

Paul said the IRS has been too liberal about what physical work is considered significant enough at the project site or a factory to qualify as the start of construction. He wants the Treasury to “require work significantly beyond the current minimal standards.”

Finally, a complaint from power plant owners who use coal and other fossil fuels is that wind farms have an incentive to sell electricity into organized markets even at negative prices. Any sale entitles the project to production tax credits on the electricity output of as much as $24 a megawatt hour. Paul wants the IRS to deny tax credits on electricity sold at negative values.


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