Study by oil-backed group says wind industry doesn’t need tax credit

Source: By Ben Geman, The Hill • Posted: Friday, November 2, 2012

Critics of tax credits for wind energy projects are intensifying their push to kill the incentive with a study that calls it “rent seeking” by an established industry that doesn’t need the subsidy.

The conservative American Energy Alliance (AEA) unveiled the study Thursday as wind power companies — joined by allies including President Obama — are pushing Congress to renew credits that are scheduled to lapse at year’s end.

AEA, which receives some of its funding from fossil fuel companies, is circulating the study on Capitol Hill ahead of a lame-duck battle over the fate of the multibillion-dollar incentive.

The group is also promoting the study to editorial boards, governors and others.

AEA commissioned a study by Louisiana State University economist David Dismukes that argues the 20-year-old production tax credit (PTC) provides “training wheels” to an industry that doesn’t need them — especially at taxpayers’ expense.

“[T]he federal PTC should expire since it has morphed from an ill-designed temporary subsidy for a purportedly ‘infant industry,’ into an inequitable tax hand-out for what is clearly a well-established industry that distorts markets and allows wind to compete unfairly with both conventional generation resources and even other types of renewables,” the study states.

Dismukes argues that green electricity requirements in place in 30 states, not the tax credit, have been the primary driver of the growth in wind power generation over the past five to eight years, creating a guaranteed market.

As a result, the credit allows wind power companies to “double dip,” the study states.

The report also lays out a series of other arguments against the PTC, alleging for instance that it creates “hidden costs” for power consumers to cover the expense of connecting intermittent, remotely located resources to the grid.

AEA is sponsoring an event with The Hill about the PTC on Nov. 14.

The wind industry calls the incentive vital to financing wind power projects. New installations have dropped sharply when the credit has been allowed to lapse, which last occurred in 2004.

Industry advocates note that job losses have already begun along the wind power supply chain amid uncertainty over the credit’s fate, such as layoffs in Colorado by Vestas Wind Energy Systems.

The industry will shed 37,000 jobs if the credit expires, according to a study by the consulting firm Navigant that was commissioned by the American Wind Energy Association (AWEA).

AWEA, the wind industry’s main trade group, also pointed Thursday to upbeat analysis of the credit prepared by NextEra Energy Resources, a power company that’s heavily invested in wind.

“[T]he PTC doesn’t cost taxpayers anything in actuality — because the local, state, and federal taxes paid by the expanded industry more than add up to the tax relief provided up-front to incentivize all that private investment. Without the PTC, the industry wouldn’t be nearly as big and thus wouldn’t pay those taxes, so there is no opportunity cost,” AWEA said, citing the NextEra analysis.

But the AEA report argues that the PTC isn’t needed to ensure long-term growth in wind energy generation. It also pushes back against arguments about layoffs if the PTC lapses, noting that the industry is “already overbuilt with considerable excess capacity” in several regions.

“The fact that the wind industry may experience a market-driven downward correction in output and employment does not signify some type of policy failure justifying an expense of this nature,” the report states.

The thrust-and-parry over the credit will intensify in coming weeks when Congress returns for what’s shaping to be a frenzied stretch of battles and deal-making.

The Senate Finance Committee in August approved a one-year extension of the credit, which carries an estimated cost of $12 billion over the next decade. But the committee bill, which extends a series of expiring tax incentives, did not make it to the Senate floor

The credit has backing from many Democrats, and Republicans in Iowa and other heartland states where the industry is growing

But it remains unclear whether the incentive — which has historically had bipartisan support — will clear Congress at a time when many Republicans oppose green energy programs.

GOP White House nominee Mitt Romney opposes the credit’s extension.