Wednesday, March 21, 2012

Production Tax Credit Expiration Jeopardizes Wind Farm Manufacturing And Construction

It begins to look like Congress will let the $0.022 per kilowatt hour Production Tax Credit for wind generated electrical power expire when the current legislation runs out December 31, 2012, and that is already putting a damper on wind farm expansion plans, dampening the economic impacts of wind farm construction work and wind generation equipment manufacturing, as big players in that sector of the construction economy contemplate major layoffs. John Graham, CEO of BP Wind Energy, which owns the 100 megawatt Flat Ridge wind farm north of Medicine Lodge, Kansas, says the tax credit is still needed to make wind energy generation price competitive with coal and natural gas fueled power.

According to Graham, the Production Tax Credit costs the government $3.5 billion annually in lost tax revenue, but produces $15 to $20 billion in investment in wind power manufacturing and construction. Matt Kaplan of Cambridge, Massachusetts based IHS Emerging Energy Research estimates the Production Tax Credit has so far produced an addidional 12 gigawatts of wind power generating capacity, or 20% more additional generating capacity than any earlier year of wind power construction. Kaplan predicts the rate of growth will fall by 85% if the Production Tax Credit is permitted by Congress to expire at the end of this year.

Kaplan’s prediction has a strong historical basis: in the years 1999, 2001 and 2003, previous times Congress has allowed the Production Tax Credit to expire, new wind power generator construction plummeted between 73% and 93% upon expiration of the tax incentive. Once the Production Tax Credit expires, the only remaining incentive for continued wind power construction is the state by state legislative mandate for utilities to buy a certain percentage of their electricity from renewable sources – a mandate that only exists in twenty nine states.

Wind power equipment maker Vestas has already threatened layoffs of 1,600 plant workers in Colorado if the tax credit is permitted to expire, and Mitsubishi Heavy Industries already scrapped plans for a $100 million manufacturing facility in Arkansas. The American Wind Energy Association predicts loss of a total of 37,000 jobs if the credit is not renewed.

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