Senators push for end to PTC, citing wind industry’s maturity

Source: Nick Juliano, E&E reporter • Posted: Wednesday, December 18, 2013

Sens. Lamar Alexander (R-Tenn.) and Joe Manchin (D-W.Va.) today are urging leaders of the Finance Committee to abandon the wind production tax credit, saying that the industry has outgrown the need for federal support and that the credit helps to distort energy markets.

Their letter comes a day before Finance Chairman Max Baucus (D-Mont.) is set to unveil a draft bill that would establish long-term tax policy for all energy sources — part of his push for comprehensive tax reform (E&E Daily, Dec. 17). But it also comes after the chairman acknowledged that temporary provisions such as the PTC may have to be handled in a separate “extenders” package next year (Greenwire, Dec. 17).

Alexander and Manchin are among the Senate’s top critics of the wind industry’s prized tax credit. While the $23-per-megawatt-hour PTC also supports geothermal, biomass and other renewable sources, wind is responsible for the lion’s share of its cost, estimated at more than $1 billion per year. Wind is the largest non-hydro renewable electricity provider and was the source of more new installed capacity than any other source last year, surpassing natural gas.

Eight Republicans joined Alexander and Manchin in sending the letter: Sens. Jeff Flake (Ariz.), Tom Coburn (Okla.), Jeff Sessions (Ala.), Ron Johnson (Wis.), Mike Lee (Utah), Tim Scott (S.C.), James Risch (Idaho) and John McCain (Ariz.). The senators say the industry’s track record demonstrates that the credit is going to a “mature technology” no longer in need of government support. Continuing it, they say, creates a glut of wind electricity that distorts markets by allowing wind generators to sell at negative prices.

“Continuation of the wind PTC not only picks winners and losers, it is distorting our energy markets and it’s past time to end a temporary tax credit that was put into law in 1992,” they write. “After more than 20 years, and tens of billions of taxpayer dollars, it’s time to let the wind PTC expire and continue to invest in new technologies.”

Wind industry proponents point to a sharp drop-off in activity this year, which they say was caused by uncertainty over the PTC before it won a one-year extension in January. They have said the industry just needs a few more years of government support before being able to stand on its own; last year the industry’s main lobby group floated a phaseout through 2019 in conjunction with comprehensive tax reform. Industry backers say ending the credit early would stunt its growth and jeopardize construction and manufacturing jobs.

The Alexander-Manchin letter sent today has been in the works for at least a month, and its text has circulated previously.

Alexander spoke against the PTC on the Senate floor this afternoon, arguing the money spent to sustain the credit could make a dent in the budget deficit. His speech came as the Senate was debating a bipartisan budget agreement that would undo $63 billion in spending cuts over the next two years.

“Congress is struggling to find $63 billion to spend in the budget agreement, when all we have to do is get rid of the wasteful wind production tax credit,” Alexander said, according to an advance copy of his remarks. “For the next 10 years, extending the tax credit one year at a time could cost $60 billion or more. Using the wind production tax credit to pay for all or part of the budget agreement would do this country more good than extending this subsidy for expensive, low-quality wind electricity ever could.”

The $60 billion estimate is based on figures in a letter sent earlier this fall to Rep. James Lankford (R-Okla.) from the Joint Committee on Taxation estimating that a one-year PTC extension would cost about $6 billion over a decade and a five-year extension would cost $18 billion over a decade, an aide said.

Alexander and other conservative critics a year ago said a five-year PTC phaseout would cost $50 billion to $60 billion — based on an estimate from the Joint Committee on Taxation that the most recent PTC extension would cost $12 billion over a decade.

Independent analysts have said the type of calculation Alexander is using doesn’t capture everything that goes into the budget scoring process, and they have prepared much lower cost estimates for a variety of longer-term PTC designs. Estimates of the cost of a permanent PTC, a four-year extension or a phaseout over several years generally range between $10 billion and $22 billion (E&E Daily, Dec. 17, 2012).

Killing the PTC has been a top priority for conservatives this year, and the credit is likely to remain in the cross hairs of a continued lobbying push through next year.