Kitzhaber joins call for renewable energy tax credit extension

Source: Lee van der Voo • Sustainable Business Oregon • Posted: Friday, November 18, 2011

Oregon Gov. John Kitzhaber joined the Governors' Wind Coalition in calling for an extension of the Renewable Energy Production Tax Credit.
 Oregon Gov. John Kitzhaber joined the Governors’ Wind Coalition in calling for an extension of the Renewable Energy Production Tax Credit.

Gov. John Kitzhaber has joined a coalition of governors in asking Congress to extend the Renewable Energy Production Tax Credit for at least four years.

The credit provides a 2.2 cent per kilowatt hour credit for power produced by wind, solar, geothermal and some bioenergy facilities for their first 10 years. It expires at the end of 2012.

Governors in 23 states, including Oregon, sent a letter to Congressional leaders yesterday asking for a multi-year extension of the credit, suggesting that an extension of at least four years would be required to lure new investments in wind development and boost domestic energy production.

The letter comes at a time when Vestas Wind Systems A/S CEO Ditlev Engel warned last week that the wind energy industry could “fall off a cliff” if U.S. lawmakers don’t extend the production tax credit — or PTC as it’s often called. It also follows the introduction of legislation by Rep. Earl Blumenauer, D-Ore., and Rep. Dave Reichert, R-Wash., to extend the PTC until 2016. The legislation aims to buoy wind development and also extends a 1-cent per kilowatt hour credit for biomass, geothermal, small irrigation, landfill gas and hydropower, set to expire in 2013.

“I think that the governor believes that the PTC has been an incredibly effective incentive for the development of renewable energy in Oregon that is bringing jobs to all corners of the state, both in urban and rural communities, and that it’s been a great return on investment in terms of development in jobs and communities, in developing alternatives to fossil fuels and in manufacturing, and it ought to be extended,” said Tim Raphael, spokesman for the governor.

Crafted by the Governors’ Wind Energy Coalition, the letter was sent on behalf of governors in 23 states.

It reflects growing concerns among state leaders that a slump in wind energy development could lead to job loss in an already limping economy. The letter says manufacturing is already slowing as a result of the PTC’s pending expiration, and suggests a last-minute approach by Congress would interrupt growth in the wind energy sector and provoke job loss.

“The leading wind project developers and manufacturers are slowing their plans for 2013 and beyond due to the current uncertainty. Some developers have no projects scheduled for 2013, and are beginning to lay off employees. The ripple effect of this slow down means reduced orders for turbines and decreased business for the hundreds of manufacturers who have entered the wind industry in our states. If the tax credit is allowed to expire at the end of 2012, there will be negative impacts on the high-tech manufacturing jobs that the industry has brought to or created in our states,” the letter said.

In introducing their legislation, Reichert and Blumenauer also pointed to financial lenders’ hesitation to provide capital for projects six to eight months before the tax credit has historically expired as cause for concern. They said rushing to beat expiration dates also adds costs that boost electricity prices. The PTC has expired several times since its creation in the Energy Policy Act of 1992, extended in year-end packages of expiring tax provisions, as well as in the Energy Policy Act of 2005.

The prediction that manufacturing and planning would slow as PTC expiration looms has been loudly echoed by the American Wind Energy Association and by some companies. Following third-quarter announcements of disappointing sales by Vestas last week, the Danish company, which bases its North American operations in Portland, also warned of layoffs. For now, the company is still moving to a new headquarters building and hiring in anticipation of a busy 2012.

Meanwhile, governors pressed for more certainty for the industry, urging a departure from wind’s boom-and-bust cycle and parity with oil and gas subsidies for domestic production, subsidies that haven’t expired in 100 years.

“The United States has some of the best wind resources in the world, but our lack of long-term national policies hinders our ability to develop them fully,” their letter said.