FERC commissioner offers ‘middle ground’ option in wind credit debate

Source: Hannah Northey, E&E reporter • Posted: Thursday, September 20, 2012

A Republican member of the Federal Energy Regulatory Commission is floating a plan to quell debate surrounding the fate of the wind production tax credit slated to expire at the end of the year.

Commissioner Philip Moeller said wind generators and other power plants could receive tax credits when demand for electricity soars, which would allow Congress to continue providing incentives for the industry while addressing critics’ claims that the credits are too broadly distributed.

“It’s a way to get people to think about the issue in context of this debate going forward as to whether there should be a production tax credit or not,” Moeller said. “If Congress wants, I’m throwing it out there as an idea to consider as part of the debate. … It’s based on economics and the reality of load.”

Moeller acknowledged that implementing the proposal could become difficult and that different resources face unique challenges. For example, solar producers have the advantage of producing power as the sun shines throughout the day, whereas wind blows strongest at night.

Even so, Moeller said his idea could serve as a “middle ground” in the prickly debate on Capitol Hill over whether tax credits for wind generators should be allowed to expire at the end of the year.

Arguments over the fate of the tax incentives have grown louder in recent weeks.

Exelon Corp. recently issued a report that found wind generators using the tax incentives are distorting the electricity markets and triggering reliability issues, an accusation the American Wind Energy Association has flatly rejected

Production tax credits are creating incentives for wind generators, mainly in the Midwest and Texas, to produce electricity at a rate that harms other generators, according to the report.

Specifically, electricity production from wind turbines, nuclear reactors and other generators can outweigh demand and force utilities to pay the grid operator to take their power in some wind-rich areas, but only wind producers can lean on the production tax credits to recoup costs (Greenwire, Sept. 14).

Exelon’s opposition to the tax credits prompted AWEA to terminate the utility’s membership on its board of directors (Greenwire, Sept. 10).

AWEA has argued that the real issue is a lack of transmission and that wind provides a cheap source of power that benefits ratepayers.

“The problem is not with the design of the PTC, which provides strong incentives to install good turbines in good locations; the problem is with a lack of transmission and flexible supply and demand sources on the grid, both of which FERC is working on and belong in the regulatory arena,” said Rob Gramlich, AWEA’s senior vice president for public policy.

Moeller agreed a big issue is the lack of sufficient transmission and said electricity generation — from wind, coal or any other resource — that isn’t supported by sufficient power lines is going to cause operational challenges.

But developers aren’t proposing to build power lines in certain congested regions of the United States, Moeller added, and the projects are difficult to site and finance.

“The transmission grid is really the thing we need to focus on to ensure that as more resources get added to the grid, we can deliver that power,” he said.