The credit expired in 1999, 2001, and 2003 and was always renewed, but each time it expired jobs plummeted as energy producers held off on planned projects. It was most recently renewed in the economic stimulus bill signed by President Barack Obama in February 2009.
Governors from 28 states had called on Congress to renew the wind production tax credit — or PTC — which was first enacted in 1992 and supported by prominent Republicans. Lately, however, conservative House Republicans have opposed renewal of the wind credits and elimination was written into the GOP party platform in August.
The PTC is an income tax credit of 2.2 cents per kilowatt-hour for the first 10 years of electricity production from large-scale wind turbines. The bill allows companies to apply for the credit if they begin construction on a plant in 2013 and finish it by the end of 2014. Earlier versions would have required construction to be finished by the end of the year to qualify for the credit.
Renewing the tax credit results in a loss of an estimated $12 billion in tax revenue over 10 years.
The bill also extends a $1.01-per-gallon tax credit for cellulosic ethanol made from corn plants, grasses, wood and sources other than corn kernels. The bill adds algae as another source material that will be eligible for the tax credit.
Ethanol makers will be allowed to continue to depreciate equipment for new plants placed in service in 2013, and the bill extends biodiesel production tax incentives for two years. Those measures are aimed at encouraging increased production of fuel from renewable sources.
Cellulosic ethanol has been slow to get off the ground after decades of scientific research and development but large-scale plants are now under construction in several states including Florida, Georgia, Iowa, Kansas, Michigan and Mississippi.
Renewal of the credits that encourage investment in new plants is important for the industry to continue to grow, said Bob Dineen, CEO of the Renewable Fuels Association, a trade group.
"Everybody would like to have longer extensions for tax policy because one thing investors need to see is certainty," Dineen said. "A one-year extension isn't great, but it does provide some measure of certainty that government support is going to continue while there's a longer debate about what to do about overall tax policy."
Gas stations that want to install pumps capable of distributing E85, which is 85 percent ethanol and 15 percent gasoline or those who add 15 percent ethanol —or E15 — pumps also can get a tax credit under the bill.
Associated Press reporter Ken Kusmer in Indianapolis contributed to this report.