Wind power industry braces for slowdown as hopes fade for tax credit extension

Source: Nathanael Massey • E&E • Posted: Monday, February 20, 2012

The wind energy industry finds itself in damage-control mode after House and Senate negotiators reached a deal on the payroll tax extension — but failed to include an important tax credit for wind energy.

Industry leaders say the production tax credit (PTC) for wind is critical to preserve thousands of jobs and ensure the sector’s growth. Its omission raises the possibility that the robust growth enjoyed by wind power over the past few years might soon shudder to a halt.

“On the manufacturing side, especially, expect to see a dramatic downturn in production,” said one industry official, who asked to remain anonymous because the payroll tax bill had not yet been finalized.

The PTC has expired three times since it was first enacted in 1992, and each time, the wind energy industry has plummeted, with rates of new installations decreasing by between 73 and 93 percent, according to the research firm Navigant Consulting.

Not all parties were ready to throw in the towel. “A bipartisan group of members of Congress are continuing to provide leadership in extending the PTC,” said Peter Kelley, vice president of public affairs at the American Wind Energy Association (AWEA). “There’s still a couple of ways that this can get done in the first quarter.”

He acknowledged, however, that the options remaining were “a pretty short list.”

A year of winding down?

Officials from various sectors of the wind energy industry had previously called the payroll tax bill “effectively the last chance” to pass the PTC in the first quarter of 2012, and said a failure to do so would begin a large-scale slowdown within the industry (ClimateWire, Feb. 9).

Although the tax credit does not expire until the end of 2012, the industry has long argued that companies can’t wait until the eleventh hour to know whether the credit will be extended. Manufacturers, in particular, require significant lead time on any projects scheduled for 2013, meaning that uncertainty after Dec. 31 can cause them to slow down operations as much as 12 months in advance.

The unidentified industry official pointed out that, to date, no wind turbine orders have been placed for 2013.

The wind energy giant Vestas Wind Systems has stated that it would lay off 1,600 of its employees in the United States if the tax credit were not extended. Navigant Consulting estimates that a failure to extend the PTC would result in the loss of some 37,000 American jobs in total, beginning immediately and accelerating throughout 2012.

In other words, even if the PTC is passed in a lame-duck session at the end of the year, most of the jobs will already have been lost.

Republicans take the wind from coalition’s sails

For months, the wind energy industry, led by AWEA, had been massing behind the PTC. Its efforts mustered a broad spectrum of support, including support from legislators from both sides of the aisle, business groups like the National Association of Manufacturers and organizations from the Union of Concerned Scientists to the editorial board of the Denver Post.

On Tuesday, a group of major corporations, including Starbucks, Ceres, Nike and Yahoo Inc., sent a joint letter to House Minority Leader Nancy Pelosi (D-Calif.) and Speaker John Boehner (R-Ohio), urging them to extend the PTC.

“Failure to extend the PTC for wind would tax our companies and thousands of others like us that purchase significant amounts of renewable energy,” the letter states.

However, resistance from Republican lawmakers appears to have won out. Many Republicans remain staunchly opposed to any tax credit or subsidy for renewable energy, and the issue became sharply politicized after solar tube manufacturer Solyndra’s collapse last year.

On Wednesday morning, Sen. Lamar Alexander (R-Tenn.) took the floor of the Senate to urge lawmakers to drop the extension. “I cannot think of anything that would derail more rapidly the consensus that is developing about extending the payroll tax cut than to do such a thing,” he said.

Still, AWEA and other advocates for the PTC are not yet ready to admit defeat.

Legislators advocating for wind “are looking at every opportunity to get this done in the first quarter, because they realize the urgency of keeping the tens of thousands of U.S. manufacturing jobs that are on the line,” said AWEA’s Peter Kelley. “The PTC needs to be passed in the first quarter to avoid losing those jobs. There are still ways that can happen.”