Senate Finance Moves Forward On Energy Tax Credit Extension

Just before the summer recess in Congress was declared, the Senate Finance Committee passed a measure including a one year extension of production tax credits for wind and geothermal energy projects, making the incentive applicable to projects breaking ground any time until the end of 2013. The credit is set to expire at the end of 2012 unless both houses of Congress pass the measure, cobbled together by Senate Finance chairman Max Baucus and ranking member Orin Hatch. Reported out of the Senate Finance Committee on a bipartisan vote of 19-5, the bill includes a total of $205 billion in tax cut extensions for individuals and businesses.

While Committee passage of the bill is welcomed by energy businesses, some renewable energy advocates mourn that it does not go far enough. “A temporary tax provision I don’t think provides enough incentive for capital investment, and that’s what our industry needs,” according to Associated General Contractors of America Senior Executive Director of Governmental Affairs Jeff Shoaf.

American Council of Engineering Companies Vice President of Governmental Affairs Steve Hall, says the tax credits are “absolutely essential” for the health of the renewable energy economy.

The fate of this legislation when Congress reconvenes after the summer break is still uncertain. Tax credit extensions are just the first step in comprehensive reform of the Internal Revenue Code, and all such legislation may well be pushed back on the Congressional calendar until after the November elections. Furthermore, should some sort of tax cut extender bill get passed when Congress comes back into session, there will be heated debate over, and revisions to, the contents of this bill before anything reaches the Oval Office for signature.

Wind Energy Tax Credit Expiration Threatens Illinois’ Economy With Lost Billions

According to an Illinois State University report released this month, wind farms in the state will add $5.8 billion to the Illinois economy over the life of the projects. However, much of this economic resurgence is threatened by Congressional inaction over renewal of the wind energy tax credit which expires at the end of this year. ISU’s Center for Renewable Energy Director David Loomis says in the study report that Illinois wind farms have created 19,047 construction jobs here, plus 814 long term jobs in maintaining and operating the huge windmills. Landowners with turbines on their property earn $13 million each year from lease payments, and the wind generators pay $28.5 million per year in property taxes to local governments.

Loomis points out that wind farm construction is now at a standstill because of the threatened tax credit expiration. Sierra Club Illinois Chapter President Jack Darin says that renewal of the tax credit “is critical for the health of our environment.” Illinois’ wind farms already produce enough electricity to power nearly 200,000 homes per year. Great Plains Laborers District council Legislative Affairs Director Mike Matejka points out that “Wind jobs are very, very important as we bridge the recession.”

With all this economic activity at stake, it seems odd that nobody in Washington, D.C. is interested in passing a simple bill extending the tax credit before it is too late to prevent major hits to the wind industry here.

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.

White House Stumps For Wind Power Development

Obama Administration officials are using the Independence Day holiday week to press for more development of wind power around the country. Administration officials speaking in North St. Paul Minnesota and along the Atlantic coast are busy urging Congress to quickly pass an extension of the wind power tax credits which will expire at year end, and touting completion of the federal environmental assessment of 164,000 acres of potential offshore wind turbine leases by the Bureau of Ocean Energy Management.

Senate Appropriation Subcommittee on Interior and Environment Chairman Jack Reed says he is “striving to make Rhode Island a national leader in offshore wind development, and helping to bring assembly and manufacturing jobs to the state.” Interior Secretary Ken Salazar says the United States is now harnessing 21% of global wind power capacity, emerging as a leader in the field. Ocean Energy Management Director Tommy Beaudreau says completion of the environmental assessment “sets the stage for moving forward aggressively with lease sales” in the area running along the Atlantic coast from 11 miles south of Martha’s Vineyard to 13 miles east of Block Island.

Meanwhile, White House Council on Environmental Quality Chairman Nancy Sutley, speaking at a news conference from the base of a 115 foot Minnesota Municipal Power wind turbine in North St. Paul, urged Congress to act now by passing legislation extending tax credits of 2.2 cents per kilowatt hour for wind power generation, and 30% tax credit for investment in equipment used to manufacture clean energy components in this country. “When Congress puts its mind to it, something can be done fairly quickly,” Sutley said.

Other speakers representing wind developers, engineering concerns and manufacturers of wind generating equipment at the same conference pointed out, however, that Congressional inaction on the tax credit extension has already produced staff cuts at their companies, and the last time the production tax credit expired, new wind farm installations fell by 73% on a year over year basis.

Minnesota Court Strikes Local Wind Farm Setback Rules

The Minnesota Court of Appeals struck down a Goodhue County wind farm setback rule earlier this week in favor of less stringent state established setback requirements. Goodhue County commissioners passed a regulation imposing a 2,700 foot setback rule on the project proposed for 5o turbines each 400 feet high, ostensibly to eliminate shadow flicker and turbine noise from neighboring properties. The state permit for the project imposed only 1,500 foot setback.

The Minnesota Public Utilities Commission issued the 1,500 foot setback permit after a three day hearing which found that the county’s larger setback would have made the wind farm impossible to build. County Commissioners has imposed the 2,700 foot setback to completely eliminate noise and flicker from neighboring properties so as to avoid the cost of modeling and measuring any health effects from noise and flicker. The Court of Appeals determined that there was no evidence of any health effects from flicker and noise, and that the county’s rule was unjustified.

AWA Goodhue Wind, developer of the project, still needs to satisfy environmental requirements respecting bald eagles and other local wildlife before construction can commence. Coalition for Sensible Siting, the environmental group opposing the wind farm in the court case, has not yet decided whether to appeal the ruling to the Minnesota Supreme Court.

Wind Power Layoffs Mounting While Congress Remains Gridlocked

Federal Renewable Energy Production Tax Credits are scheduled to expire December 31, 2012, unless Congress acts to extend them. Congress isn’t doing anything about moving extension measures forward. The wind energy industry needs at least 18 months of certainty about availability of the credit to make starting a new project economically viable. As a result, industry layoffs are already beginning, and by the end of 2012’s second quarter are expected to reach 10,000 jobs lost.

Passage of time makes the picture even bleaker. Without Congressional action, wind power layoffs could reach 20,000 jobs lost by the end of the third quarter and 30,000 jobs lost by year end. Navigant Consulting predicts total wind energy job losses in the next 12 months to reach 37,000 if Congress waits until the last minute to extend the tax credits.

On the other hand, if Congress were to act now, according to the American Wind Energy Association, the industry could create 100,000 new jobs in the next four years. Certainty about tax credit availability is the key. Newton, Iowa’s wind turbine blade maker TPI Composites CEO Steve Lockard says “Our company has created more than 700 new jobs in Newton, and a second wind energy company there now employs over 100 people. Our industry can do the same in hard hit towns all across the U. S. if Congress will let us, and doesn’t increase taxes on wind power next year.”

Apparently the only wind blowing through the Capitol building in Washington, D.C. is political hot air.

UK Offshore Wind Farm Claims Fluor Caused Foundation Defects

Edinburgh based electric utility SSE plc claims welding defects in 52 of 140 steel tube foundations for windmills in its under construction offshore Greater Gabbard wind farm are causing a two year delay in completion of the Fluor $1.8 billion, lump sum turnkey project. Fluor CEO David Seaton disputes the claim. The turbines in question are located in waters up to 32 meters deep, and the tubes themselves are as large as 6.3 meters in diameter, weighing 700 metric tons.

The Chinese fabricated steel tubes are the basis of Fluor’s charges against the project of $343 million in 2010, and another $60 million last year, as reported in company filings. Ownership of the project has changed hands while under construction, with Fluor selling its interest to SSE, which also acquired Dublin based Airtricity Holding Ltd. Airtricity had been co-owner of the project with Fluor. Then in 2008 SSE sold half interest in the project to Essen, Germany based RWI Innogy GmbH.