It is generally understood that the pattern of repeated expiration and short-term renewal of the federal production tax credit (PTC) causes a boom-bust cycle in wind power plant investment in the U.S. This on-off pattern is detrimental to the wind industry because ramp-up and ramp-down costs are high and players are deterred from making long-term investments. As this paper demonstrates, the volatility of investment associated with the PTC is unrelated to the underlying economics of wind; instead it is due to the dynamic of power purchase agreement (PPA) negotiations in the face of uncertainty. The PTC is not the only means, existing or potential, for encouraging wind power investment. The wind industry needs stable policy supporting long-term investment.
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