Sunday, July 15, 2012

Wind Power Tax Credit Debate Goes Political

With the current federal wind energy production tax credit of 2.2 cents per kilowatt hour expiring December 21, 2012, layoffs in the wind energy and related industries, and rapidly falling natural gas prices are driving the debate over extension of the tax credit into the public arena. Spain based Gamesa Technology Corporation will lay off 20% of its U.S. workforce in September because of uncertainty over the fate of the expiring tax credit, according to spokesman David Rosenberg. Though Florida based NextEra energy will finish out currently ongoing developments to add 1,300 megawatts of capacity, there are no new projects slated for 2013, according to spokesman Steve Stengel. Wind turbine parts maker Mitsubishi Power Systems is mothballing a brand new $100 million parts factory in Arkansas as the tax credit expires, and taking a $250 million loss on write down of its turbine inventory.

In Texas, the nation’s largest generator of wind power, development is grinding to a halt. “Without the tax credit, I don’t think Texas will see any wind farm development,” according to Pecos County Economic Development Director Doug May. Texas wind power industries are facing the twin challenges of plummeting natural gas prices and maxed out power transmission grid capacity for moving wind power from the arid plains to population centers.

Since 1992, Congress has renewed the wind power tax credit seven times, and allowed it to expire three times. Each expiration was followed by a 73% to 93% drop in turbine installations. This year will be no exception, according to Alex Klein, research director for HIS Emerging Energy Research. Expiration of the federal production tax credit, he says, “shifts the costs of the renewable portfolio from the federal taxpayer to the electricity consumers in that state. The market will be pretty challenged without the PTC.”

Speaking in favor of renewal of the production tax credit at the opening of Spain based IngeTeam’s wind energy component factory in Menomonee Valley, Wisconsin Thursday, U. S. Energy Secretary Steven Chu urged prompt Congressional passage of a bill extending the tax credit. From the other side of the political aisle, Texas Republican Congressman Michael Conway is urging a phase out of the wind energy incentives, and a return to purely economic forces within the electric power market. “Scaling back the production tax credit will affect jobs. I get how hard that is,” Conway says, “But for the greater good of this country, we can’t continue to do things the way that we have.”

Without regard to the policy considerations surrounding development of renewable energy resources of all descriptions in our nation, it seems election year politics are going to decide which way the wind blows.

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