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See the body of the diary: it's a tax credit for each kWh produced, which allows wind projects to get more income for their production without having to sell their production at prices higher than the market will give them.

Typically, a wind project will sell its electricity to a local utility for 3-4c/kWh (usually under a long term fixed price contract) and get an additional 2c/kWh (inflated) via the PTC for the first 10 years.

The higher (and very stable when you have a fixed pirece power purchase agreement) revenue levels make the project able to service debt even during periods of low wind. The cash waterfall is simple: revenu is used first to pay ongoing operating costs, then debt costs (which are fixed if you used a fixed interest rate), and whatever's left, which is likely to be quite volatile goes to the investor.

Depending on the project, the investor and the country, debt can cover 70 to 90% of the initial investment.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Jan 19th, 2008 at 09:39:49 AM EST
[ Parent ]
So we're talking up to a 40% subsidy for the first 10 years?

We have met the enemy, and he is us — Pogo
by Migeru (migeru at eurotrib dot com) on Sat Jan 19th, 2008 at 09:47:45 AM EST
[ Parent ]
you could say that, I suppose. You might want to add the budget of the DoD, highway patrol etc..., to the price of oil, and you'd suddenly get a subsidy of several hundred percent to oil producers.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Sat Jan 19th, 2008 at 09:51:45 AM EST
[ Parent ]
Comparing a tax credit with the DoD budget is not exactly apples to apples.

What you're saying is that wind needs a wholesale price of $50 to $60 per MWh but that the wholesale price that can be locked in with long-term contracts is $30 to $40.

We have met the enemy, and he is us — Pogo

by Migeru (migeru at eurotrib dot com) on Sat Jan 19th, 2008 at 09:56:04 AM EST
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And so was I.

And the reason long term prices cannot be locked at higher levels is because it is difficult to force utilities to buy power at a higher price than they can get from coal-fired plants, especially older ones that have been grandfathered and do not have to fulfill all pollution and emission requirements and have to pay neither the environmental damage of strip mining, mountaintop removal or global warming.

So yes, I object to any expression that makes it look like wind gets huge subsidies.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Jan 19th, 2008 at 10:03:47 AM EST
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