Clock ticking for wind energy tax credit

Source: Nathanael Massey • E&E • Posted: Friday, January 27, 2012

Failing to extend the federal production tax credit, a financial mechanism meant to leverage renewable energy industries, would be a disaster for wind energy producers, industry leaders said Tuesday

Moreover, because of the relatively long business cycle required to secure permits, order materials and manufacture components used to build wind turbines, it is imperative that Congress act immediately, and not in the eleventh hour before the credit expires, they said.

Wind power generating capacity has been growing steeply since 2003, the last time the tax credit expired, said Richard Glick, vice president for government affairs at Iberdrola Renewables. However, all those gains will likely be wiped out if the credit is allowed to expire, he said, noting that many industries have already started to slow production.

“2012 could be a record year in terms of new megawatts installed,” he said. “It’s important to realize that part of that is companies are trying to get their projects under the wire before the end of the year.”

“There is a tremendous amount of uncertainty in markets right now,” he added. “Anything we can’t build in 2012, we’ve suspended operations on.”

It takes more than two years to plan and build a wind farm, said Joe Baker, CEO of Acciona Windpower. Companies are unlikely to invest in projects that won’t mature for another two years without assurance that the credit will be there to support them, he said.

“It’s a complicated, complex process to install wind energy,” he said. “You’re building a power plant, not turning on a light.”

Wind energy companies begin to downsize

Although the tax credit does not expire until Dec. 31, the window for legislative action is narrowing. The research firm Navigant Consulting predicts that wind energy companies will begin downsizing this month and accelerate the process every month until a measure extending the credit is passed.

If the credit is not extended, Navigant predicts that the industry will see a loss of 37,000 U.S. jobs and a two-thirds drop in private investment.

A bill introduced recently by Rep. Dave Reichert (R-Wash.) and Rep. Earl Blumenauer (D-Ore.) would grant a four-year extension to the existing tax credit. Some industry leaders believe that would give wind the leeway it needs to reach grid parity with conventional energy sources.

“With PTC support, the cost of wind energy is getting close to coal and gas, despite the fact that these fuels enjoy historically low prices,” said Brandon Hoeft, a sales manager for Broadwind Energy, a manufacturer of turbine components. “An additional four-year PTC should allow wind to compete without continued government incentives.”

Although the bill, called the “American Renewable Energy Production Tax Credit Extension Act,” enjoys support from the majority of Democrats and some Republicans in Congress, its passage is far from certain. Green subsidies have been under fire from Republicans for months, with criticism heightened after the collapse of the solar provider Solyndra last fall.

Iberdrola’s Glick predicted that the upcoming payroll tax bill might be the last and best chance to pass the extension. After that, he said, industries will have to begin downsizing.

“The next opportunity won’t come until December of this year, and that’s just not going to work,” he said. “You’re going to see manufacturing start shutting down.”