Wind tax credit could take a big hit in tax battle

Source: By ANDREW RESTUCCIA | 11/4/13 5:04 AM EST, Politico • Posted: Tuesday, November 5, 2013

As Congress works on a tax reform package that could take months to complete, it’s looking increasingly likely that the production tax credit, a key wind industry lifeline, will expire shortly after the end of the year — at least temporarily.

That expiration could hurt the wind industry, which saw construction of new wind projects grind to a virtual halt this year amid uncertainty over the subsidy. The production tax credit gives wind power owners a tax credit of 2.3 cents for each kilowatt-hour of electricity they produce.

One Senate aide said tax writers in Congress aren’t even talking about a year-end extenders package, which traditionally allows for the continuation of credits like the PTC. Without an extenders package, PTC supporters must pin their hopes on reviving the tax credit as part of broader tax reform, which isn’t expected to move until next year, if at all.

That state of affairs throws the wind industry into yet another period of uncertainty. Last year, the industry suffered through months of will they or won’t they extend the PTC. Ultimately, a last-minute fiscal cliff deal extended the tax credit through 2013, but developers had already halted wind projects that can take years to plan, finance and construct.

The uncertainty over renewal of the PTC had a massive impact on the industry: Just one wind turbine was installed in the first six months of 2013. The figure crept up in the third quarter, but only to an anemic 68.3 megawatts, according to an American Wind Energy Association report released Thursday. That’s a far cry from 1,000-plus megawatts that the industry built in most quarters in recent history.

“We must, as a country, get out of this unpredictable, uncertain pipeline environment,” the association’s CEO Tom Kiernan said Thursday.

Still, there was one silver lining to January’s one-year PTC extension. The wind industry won inclusion of language that makes it easier for companies to qualify for the tax credit. Now companies can take advantage of the tax credit as long as they start construction by Jan. 1, 2014. Previous rules required companies to have completed the project by the time the credit sunsets to qualify.

That gives the wind industry a small cushion if the PTC does expire at the end of the year, and project developers are ramping up work on several megawatts of projects to qualify under this year’s subsidy.

The start-construction language is “giving us a little more stability,” Kiernan said, but an expiration could still hurt the industry. He added that it’s “essential” that the PTC is extended by the end of 2014.

AWEA is taking data showing the sharp dropoff in installations to Capitol Hill as it makes the case that a PTC extension is critical.

“I think the data is frankly reaffirming the concerns we heard last fall,” Kiernan said. “I think people up on the Hill are understanding [the expiration of the PTC] led to this kind of a first half of the year that is really tough on the industry.

“We’re often the proof-point in intermittent tax credits and the damage that has caused,” said Rob Gramlich, senior vice president for public policy at AWEA.

But PTC supporters such as AWEA are facing off against a coalition of groups and companies lobbying hard to kill the tax credit.

Exelon, one of the nation’s biggest utility owners, has complained that wind power threatens its nuclear power operations, and it is pushing Republicans on the House Energy and Commerce Committee to hold a hearing on wind power, according to an email obtained by POLITICO

The Oct. 23 email from Chris Mathey, an Exelon official in Washington, encouraged Exelon staff to attend an address by Rep. Ed Whitfield (R-Ky.), the chairman of the Energy and Power Subcommittee, delivered to the American Gas Association on Tuesday.

“I will be out of town next week, but we should def have someone attend, especially since the Chairman is expected to release his EPA bill next week and we are trying to get a wind hearing in Committee,” Mathey said in the email, referencing legislation Whitfield floated with Sen. Joe Manchin (D-W.Va.).

Exelon declined to confirm the authenticity of the email, but the company did not dispute it, either. An Energy and Commerce Committee aide said the committee has no near-term plans for a hearing on the PTC.

“Exelon opposes further extensions of the wind production tax credit, and we will continue to educate policymakers about the subsidy’s significant unintended consequences on wholesale electricity markets and how it puts other, more reliable, clean generation at risk,” Exelon spokesman Paul Elsberg said in a statement to POLITICO.

“The PTC has served its purpose of jump-starting the wind industry over the last two decades. Wind is now a meaningful part of the nation’s generation portfolio, notwithstanding its expense and intermittent availability,” he added.

Meanwhile, outside groups like the American Energy Alliance, the political arm of the energy industry-funded Institute for Energy Research, are launching campaigns in opposition to extending the PTC.

The group sent out a Halloween-theme email to its supporters Thursday that calls the PTC the “undead zombie of government handouts.” The group took a similar tack on its Facebook page.

“The PTC has been on the back burner for a good portion of this year, given other pressing issues. The American Energy Alliance has fought two successful efforts to push back against the nomination of Ron Binz and carbon taxes. It’s fair to say we’re ready to focus our year-end efforts more strategically