Texas wind energy boom may go bust if tax subsidies disappear

Source: BILL HANNA, The Fort Worth Star-Telegram • Posted: Friday, August 24, 2012

SWEETWATER, TEXAS — The impact of wind energy in this region of West Texas can be seen simply by driving down the road.

South of Sweetwater, hundreds of towering wind turbines from some of the nation’s largest wind farms dot ridge lines as far as the eye can see.

North of town, crews are busily erecting new transmission lines to move more wind power from West Texas and the Panhandle to population centers like Fort Worth, Dallas and San Antonio.

But the wind industry building boom, which has led Texas to be the nation’s leader in wind energy, could be nearing the end if the production tax credit expires at the end of the year.

The topic has become a key issue in the presidential race, with President Obama supporting the continuation of the federal subsidy, while Mitt Romney says he would let the tax credit expire.

Obama has touted the jobs the green energy has brought to the U.S. while Romney has said wind and solar power “make little sense for the consuming public but great sense only for the companies reaping profits from taxpayer subsidies.

Wind proponents like Sweetwater Mayor Greg Wortham say the expiration of the tax credit would slow new investment in the wind industry if not bring it to a complete halt.

Wind farms like the ones around Sweetwater, which is about 200 miles west of Fort Worth, or others closer to the Metroplex wouldn’t go away, but it would likely end the incentive for building new ones. For Sweetwater, which proclaims itself as the wind energy capital of the U.S. — it’s also well known for its rattlesnake roundup — losing the tax credit would be a significant blow.

“It’s almost like if our own Congress wasn’t in our way, this would be a danged good economy,” said Wortham, who is also executive director of the Texas Wind Energy Clearinghouse that promotes wind energy

The wind industry is big business in Nolan County, where Sweetwater is located. The tax base has grown from about $500 million in 2000 to $3 billion today. Besides making some ranchers rich, the money has pumped dollars into rural school districts where some new schools have been built for the first time in nearly a century.

Current farms grandfathere

The tax credit works by giving wind farm owners 2.2 cents for every kilowatt-hour of power they produce for 10 years. That subsidy, which makes wind power far more competitive, is expected to cost the federal government about $1.3 billion this fiscal year.

While current wind farms would retain the tax credit, any wind farm that comes online after 2012 wouldn’t qualify for the tax break unless it’s extended by Congress.

Already, manufacturing companies spread across Texas and the nation have started laying off employees as orders dry up, according to the American Wind Energy Association. If the tax credit expires, the association says 37,000 jobs would be lost in the wind industry over the next two years. There are 37 plants manufacturing components for the wind industry in Texas, according to the AWEA.

“It does have a paralyzing effect,” said Peter Kelley, AWEA’s vice president of public affairs. “We’re already seeing layoffs and slowdowns.”

AWEA said Dallas-based Trinity Structural Towers, which has a plant in Fort Worth that builds 260-foot towers, would shift resources away from wind turbine tower manufacturing. Officials with Trinity didn’t return phone messages left with the company.

Wind energy isn’t foolproof. Critics note that the wind doesn’t normally blow on hot summer days when electricity demand soars in Texas, meaning the grid still must have enough power plants on standby for the hottest of days.

But it has been supplying more and more power to the Texas grid.

In 2011, wind accounted for 8.5 percent of the power generated in Texas, up from 2.7 percent in 2007, according to Electric Reliability Council of Texas, which oversees the grid that provides power to 85 percent of the state’s population.

Playing politics

Some Republicans in Congress want to halt subsidies completely and let market forces decide whether wind can survive on its own.

Earlier this month, the Senate Finance Committee approved a one-year extension of the tax credit by 19-5 vote, but it has not come up for a vote on the Senate floor.

Sen. John Cornyn, R-Texas, cast one of the five “no” votes, but did support extending the credit with a 20-percent reduction.

“Sen. Cornyn is committed to permanent, pro-growth tax reform that lowers rates, broadens the base, and helps job creation,” said press secretary Drew Brandewie.

But Republican Sen. Charles Grassley of Iowa, where the second-most wind installations are located in the U.S., argued that the subsidy shouldn’t be cut off or reduced.

“No single energy tax incentive should be singled out over others, energy-related and not, before a broad-based tax reform debate,” Grassley said in a statement.

In Sweetwater, Wortham said residents are frustrated with the lack of strong support from the Texas Republican Congressional delegation on wind, noting that it was once an issue the GOP supported. The tax credit began under President George H.W. Bush’s administration in 1992 and wind power greatly accelerated under President George W. Bush’s leadership.

In West Texas, Wortham said, residents welcome all kinds of energy — oil, gas, coal, nuclear as well as wind — and it shouldn’t be about pitting one energy source against another.

“Let’s be for all of it because we’re out here making it,” Wortham said. “Right now, they’re playing with people’s livelihoods with this tax credit.”

This report includes information from the Associated Press