Most early wind farm development in the United States took place in California because the state granted a 25% income tax credit for wind energy investment, utilities signed contracts for power at attractive prices, state-funded wind measurement studies documented good wind resources, and because the state government, utilities, and local investors encouraged development.
From 1980 through 1985, the principal market for wind turbines was tax-motivated individuals. Changes in federal tax law, including expiration of the energy tax credit in 1985 and passage of the Tax Reform Act of 1986, removed the major tax incentives for investing in wind energy. Because energy tax credits were eliminated and deductions for losses from passive investments had been reduced, the number of new wind turbines installed dropped sharply over this period. Oil prices declined during the same period, so many manufacturers and developers went out of business or were consolidated into larger operations.
After the tax law changes virtually eliminated individual investors, some wind farm developers found institutional and foreign investors to finance their projects. The increased sophistication of these investors was an early indicator of the wind industry's increasing maturation, with improving financial fundamentals and the prospects of potentially profitable investment.
History content contributors include Harley Lee of Endless Energy, James Manwell of the University of Massachusetts Renewable Energy Resource Laboratory, and Tom Gray of American Wind Energy Association. Edited by Bob Grace, Sustainable Energy Advantage, LLC.