Opportunity: Upfront capital costs are a challenge for the nascent offshore wind industry. Foreign developers seeking to invest in new U.S. markets will look to states that can provide policy certainty and favorable tax policies.
Solution: By creating an Offshore Wind Production Tax Credit, policymakers could send a clear signal to investors that their state is serious about offshore wind development and attracting middle-class jobs to the state. Additionally, policymakers could consider funding the Offshore Production Tax Credit with revenue garnered from leasing state waters to developers, considering areas that would not interfere with tourism or fishing. Policymakers could consider a cap on total tax credits allocated over a ten-year period and a built-in sunset to ensure funds are used wisely.
Example: In 2003, New Mexico instituted the Renewable Energy Production Tax Credit (REPTC) to stimulate clean energy investment. The program was so successful that all available production tax credits for solar have been claimed until 2022. The tax liability for wind and biomass projects are capped at $20 million per year for ten years, a fraction of the money the state will earn by leasing land for renewable energy uses. Those land leases are expected to bring in $574 million to the state, far exceeding the cost of the tax credits. Neighboring states, including Arizona, followed New Mexico’s lead and instituted similar policies.