As wind credit remains campaign-trail focus, DOE report says extension vital

Source: Nick Juliano, E&E reporter • Posted: Wednesday, August 15, 2012

As the debate over wind energy subsidies heats up the campaign trail, the Department of Energy today released a report showing that stable policy support has boosted wind installations and manufacturing in recent years and arguing that expiration of a key tax credit could spell doom for the industry next year.

DOE’s “2011 Wind Technologies Market Report” found that the number of installed turbines rose in 2011 from the previous year and that trend is expected to continue this year, although the industry remains below its peak pre-recession performance levels of 2008-2009. The report also demonstrated a burgeoning domestic manufacturing sector that is now providing nearly twice as much material for U.S. wind farms as it was five years ago.

“With federal tax incentives for wind energy currently slated to expire at the end of 2012, new capacity additions in 2012 are anticipated to exceed 2011 levels and perhaps even the highs in 2009 as developers rush to commission projects,” the DOE report says.

At the same time, policy uncertainty — in concert with continued low natural gas prices, modest electricity demand growth and the slack in existing state policies — threatens to dramatically slow new builds in 2013 and beyond, it says.

The report comes as Congress remains undecided on whether to extend key tax breaks for wind energy that are set to expire at the end of this year. It is being released on the same day President Obama continues a three-day bus tour through Iowa, home to one of the largest wind industries in the United States, where he is highlighting his disagreement with presumptive Republican challenger Mitt Romney on whether to continue the wind tax breaks.

“My opponent and I disagree when it comes to homegrown energy like wind. Wind power is creating new jobs all across Iowa. But Gov. Romney says he wants to end the tax credit for wind energy producers,” Obama said yesterday at a campaign stop in Boone, Iowa. He pointed out that wind installations have doubled since he took office and cited industry estimates that 37,000 jobs would be lost without an extension to the tax breaks.

“So my attitude is, let’s stop giving taxpayer subsidies to oil companies that don’t need them, and let’s invest in clean energy that will put people back to work right here in Iowa,” Obama said. “That’s a choice in this election.”

Romney’s campaign said recently that he would let the wind credits lapse as scheduled at the end of this year, a position that Democrats hope causes trouble in windy swing states like Iowa and Colorado (E&E Daily, Aug. 1).

According to the DOE report, wind accounted for 32 percent of all new electric capacity added to the grid last year — trailing only natural gas — and resulted in $14 billion in new investment. The report also shows that domestic manufacturing of turbine towers, blades, gearboxes and other components nearly doubled to 67 percent in 2011 from 35 percent in 2005-2006. Eight of the 10 largest wind component manufacturers in the world had facilities in the United States last year, up from just one (General Electric) with U.S. facilities in 2004

“With a stable policy environment with the production tax credit … that predictability has given American businesses the ability to really invest in the whole supply chain here in the United States,” David Danielson, DOE’s assistant secretary for energy efficiency and renewable energy, said in an interview today.

The report cites figures from the American Wind Energy Association estimating that the industry employs about 75,000 people in the United States. It notes that total employment remains below its pre-recession peak, although it has grown since 2010.

While the wind industry had a good year last year and expects another this year, the report warns of challenges on the horizon, including uncertainty around the tax credit, low wholesale power prices driven by cheap natural gas and competition from Chinese suppliers.

On the policy front, the Senate Finance Committee earlier this month voted to extend for one year the 2.2-cent-per-kilowatt-hour production tax credit for wind and to continue to give developers the option to claim a 30 percent investment tax credit in lieu of the PTC. The Finance package also would modify the credit’s requirements, allowing projects that begin construction next year to claim it rather than require that they be placed in service. That effectively would add another six to 12 months to the life of the credit, industry sources have said. The credit still needs to pass the full Senate, and its prospects remain murky in the House.