A note on energy sourcing and Federal Tax Credits to wind investments

The Production Tax Credit (PTC) has been critical for U.S. wind power expansion. I show that replacing the PTC with a subsidy designed to optimally vary by contract type increases wind capacity deployment while significantly reducing the fiscal cost of subsidization. • Cost-effective subsidy (CES) depends on the contract type chosen by developers. • Replacing flat PTC with CES lowers the fiscal cost of wind subsidies. • CES does not reduce net wind capacity additions compared to flat PTC. • CES can raise expected net wind capacity additions.