With deadline looming, PTC backers focus on eligibility requirements

Source: Nick Juliano, E&E reporter • Posted: Tuesday, December 11, 2012

They may not be able to do much to influence the “fiscal cliff” negotiations that remained at an impasse last week, but wind energy supporters are continuing to pound the halls of Congress with a somewhat nuanced request that will have an outsized influence on the state of the industry.

The ask all year has been for an immediate extension of the wind production tax credit, which expires Dec. 31 without congressional action. But at this late stage of the game, simply changing the date in existing law won’t be enough to do much good for the industry, supporters say. Instead, they are focused heavily on persuading House Republicans to accept a modification to PTC eligibility requirements that already has won bipartisan backing from the Senate Finance Committee.

In the tax code as it stands today, wind energy developers cannot claim the 2.2-cents-per-kilowatt-hour PTC until turbines are “placed in service” — in other words, spinning to produce electricity. But Sen. Chuck Grassley (R-Iowa) persuaded his colleagues to change that requirement to facilities where “construction … begins” before the credit expires, extending the credit to any wind farms that break ground by the end of next year and effectively providing another year for the credit.

“If we get that, that’s two years of the type of certainty that we need, but that’s really the fight right now,” said Chet Culver, the former Democratic governor of Iowa who now works with wind companies as a private consultant.

Changing a few words may seem relatively minor, but it makes a huge difference for the industry, where it typically takes at least 18 months from the time turbines are ordered to when they begin to spin. That means a simple extension of existing law would do little good because manufacturers report they have received virtually no orders for next year, so there would not be enough time for new wind farms to get up and running.

“If you just give them a year, you are locking them into more layoffs, more dislocation and less of a future for a very promising industry,” said David Hamilton, director of clean energy for the Sierra Club’s Beyond Coal campaign, who has been lobbying for a PTC extension.

“The Senate language is materially different and really essential for getting the wind industry back on its feet and proceeding in a way that will continue to develop the industry,” Hamilton added during a briefing Friday hosted by the BlueGreen Alliance, a labor-environmental coalition co-founded by the Sierra Club and United Steelworkers union.

The bipartisan Western Governors’ Association also made clear that the change was a necessary component of a PTC extension in a letter to congressional leaders Friday (E&ENews PM, Dec. 7).

The Senate Finance Committee voted 19-5 — with six Republicans in support — to back the Grassley change to the PTC as part of a broader package of tax extenders in August (E&ENews PM, Aug. 2).

That bill has not come to the Senate floor, and it is unlikely to on its own. The fate of the PTC and other extenders is wrapped up with the ongoing negotiations between President Obama and House Speaker John Boehner (R-Ohio) over the looming tax hikes and across-the-board spending cuts known as the fiscal cliff (E&E Daily, Dec. 3).

The two sides remained publicly at a stalemate in the fiscal cliff talks last week, although some hope remains that an 11th-hour deal is possible. If that happens, the PTC and other extenders are widely expected to be included in whatever legislation comes before Congress.

But the details of how the PTC is extended still matter, and lobbyists working the issue say they continue to run into resistance to the Grassley language from House Republicans. Expanding eligibility for the PTC also increases its cost — a consequence that does not go over well with the fiscal conservative wing of the lower chamber in a time of tight budgets.

The Joint Committee on Taxation estimated that the Senate Finance Committee’s PTC extension would cost more than $12 billion over 10 years, making it the most expensive of the dozen energy-related provisions included in the extenders package. The other 11 energy extenders — which provide incentives for home weatherization, efficient appliances and alternative fuels, among other things — have a combined cost of about $6 billion over the next decade, according to the joint committee.

Wind is not without its defenders among House Republicans. About two dozen House Republicans are co-sponsoring legislation to extend the PTC for four years, and several high-profile freshmen have called for at least an extension this year.

In the meantime, wind industry employees are left dealing with the consequences that have led to thousands of layoffs and reduced capacity this year.

“We are avoiding making investments that might be wasted because it’s not the right time, and of course we’re looking for alternative uses of our capacity,” said Carl LaFrance, director of the wind energy business at Molded Fiber Glass Cos., in an interview Friday. “Beyond that, the worst case is we have to let some of our valuable teammates go.”

The BlueGreen Alliance briefing Friday featured several workers from manufacturing companies dealing with the uncertainty in the industry. Henry Redding, who works for bearing manufacturer SKF Industries, said the company has gone from 340 union employees six years ago to 183 as of this month. He said he had been told that the company would be shutting down for the last two weeks of this month.

“So that’s not a very happy Christmas present, I can tell you,” Redding said.