Will State Legislatures Join Congress And Cut Green Energy Incentives?

Source: Ken Silverstein, Contributor, Forbes • Posted: Friday, March 7, 2014

What’s happening in Kansas could be happening in your state. It’s not completely clear that the efforts to rollback the statewide renewable energy requirements there — and in 16 other states — will succeed. But it is obvious that, nationally, the tax preference given to renewables is fading.

Here’s the parallel: Most free market planners are opposed to mandatory statutes that require utilities to offer certain amounts of green energy. Kansas has those, along with about 30 states — in some form or another. Meantime, the production tax credit given to wind energy expired at year-end 2013. While it could get resurrected in a tax compromise, it could also permanently die down.

Just how state legislators and federal lawmakers resolve those issues will have profound economic consequences: Utilities are devising their portfolio strategies while the associated businesses are trying to make their hiring plans. Reaching an equilibrium is never easy.

“We have lost at least 5,000 manufacturing jobs,” says Liz Salerno, vice president of data and analysis for the American Wind Energy Association, in an interview. “Companies have made technical investments to retool their workers and these boom and bust cycles are not acceptable.”

At issue right now is the production tax credit that awards wind developers 2.3 cents for every kilowatt-hour they produce. In January 2013, Congress passed a one-year extension of the wind-energy credit as part of the fiscal-cliff legislation. Under the last-minute deal, wind developers who make good-faith efforts to begin wind projects this year and which continue into 2014 will qualify for 10 years of subsidies, even though the credit expires for new projects.

No immediate deal is in the works, although that could come as lawmakers trade favors to get their pet projects passed. In the meantime, wind developers such as Spanish-based Gamesa Corp. have shut down much of their operations in Pennsylvania, cutting the last of what had been around 250 jobs.

But one industry’s benefits are another’s liabilities. At least that’s how Exelon Corp. views it, which says that the credit is putting its nuclear operations at economic risk. It’s been joined by Entergy Corp, which has made implicit statements to this effect.

That blowback is at the national level. There’s also also resistance at the state level. Kansas is now considering the repeal of its renewable portfolio standards, which advocates say would willfully get produced if projects were economically viable. Kansas adopted the mandate in 2009, which requires utilities to provide 15 percent of their electric generation from green energy by 2015 and 20 percent by 2020.

The state is set to hit its goals, primarily by adding wind energy — without burdening consumers. So, what’s going on? Lawsuits have delayed the construction of an 895-megawatt advanced “supercritical pulverized” coal plant there. The Kansas Supreme Court revoked its permission to operate and remanded the case to the Kansas Department of Health and Environment.

The efforts to repeal the portfolio mandates are at least a partial response to those coal plant challenges — perhaps a way of winning a compromise: We’ll stop if you agree to stop. But even if the Kansas state legislature can muster a majority to turn back the clock, the state’s Republican Governor Sam Brownback would likely veto it: Too many people work in the state’s wind industry.

The American Legislative Exchange Council, which critics say receives its funding from oil and gas interests, is working a number of states to scale back their renewable portfolio standards. Sixteen states are reportedly considering a rollback of those mandates.

Nationally, about 30 states have enacted some variation of those green standards. Those rules, in fact, are given credit for the installation of roughly 60,000 megawatts of renewable energy generation, says IHS Emerging Energy Research. It says that a few utilities in Washington, Maine, Colorado and New Hampshire are in good shape to meet short-term goals. Others, though, will need to hustle.

“Because of the uncertainty, developers have halted their activity and stopped investing,” says Salerno, with the wind association. “We’ve seen a 90 percent drop off in activity from 2012 to 2013. The production tax credit is working: Wind energy has dropped its delivered power price by 43 percent” over the last four years.

Given the political discord, renewable power is under intense heat to stand on its own — without subsidies. Yet, that assistance has breathed life into wind and solar energies that have been expanding their reaches — just as the visible hand of government has done for other promising energy enterprises. And that’s the point made by both green energies and fossil fuels, both of which are trying to advance their technologies.