PTC Renewal Is a Victory for American Wind, but Only Short-Term
America's wind energy sector is breathing a sigh of relief after the on-again, off-again Production Tax Credit was extended. But the nation still lacks a long-term renewable energy policy
Like many other renewable energy advocates over the past few years, I sent letters to my senators urging them to support the extension of the renewable energy Production Tax Credit (PTC), one of the primary finance policy vehicles for the wind energy industry. So I was relieved when the PTC was given a one-year extension at the last minute as part of the fiscal cliff deal. Now, wind energy investors and developers can get some financial assistance for wind projects that begin construction in 2013, getting tax relief for the first ten years of a wind farm. As we all know, weaning ourselves off our addiction to fossil fuels and fighting climate change by curbing carbon emissions requires investing in clean, renewable energy sources like solar, wind and hydro.
The credit has been critical to the nation's wind industry, and has been central to the sector's growth over the past several years. Peter Kelley, vice president of public affairs for the American Wind Energy Association (AWEA), a wind trade lobbying group, described the PTC as "the business incentive that has reinvigorated American manufacturing, diversified our electricity portfolio, driven down electricity costs for consumers, and stimulated much-needed rural economic development." And AWEA's manager of grassroots advocacy Yelena Viner recently pointed out that the wind industry "installed the most electrical generating capacity in America last year."
What helps is that many parts of the United States are excellent places to harness the natural and sustainable power of the wind. According to the US Department of Energy, regions that experience annual average wind speeds of at least 6.5 meters per second at a height of 80 meters height are good locations for wind energy installations.
"The Atlantic Coast has been called the 'Saudi Arabia' of offshore wind power because wind could power 9 states from Massachusetts down to North Carolina," notes Katie Parrish of Oceana, a non-profit environmental group. "That's enough to replace 300 dirty coal plants."
FLIP-FLOPPING ON A CRITICAL RESOURCE
But while the PTC remains a valuable financing tool that has been in existence in various forms since the Energy Policy Act of 1992, there is a problem: Congress has regularly flip-flopped between renewing and retiring it.
"This 'on-again/off-again' status contributes to a boom-bust cycle of development that plagues the wind industry," notes the Union of Concerned Scientists, a non-profit environmental advocacy group. "In the years following expiration, installations dropped between 73 and 93 percent, with corresponding job losses."
As with so many other years, the PTC was set to expire on December 31, 2012. The AWEA estimates that some 3,000 American workers were laid off last year due to this fact.
PTC BY THE NUMBERS
The PTC assists renewable energy developers in securing private financing for wind installation projects, setting off demand throughout the supply chain, from blade designers to gearbox manufacturers to generator firms. Not only does the PTC give wind farm producers continuous tax relief for installations that start construction this year, but it will support the production of American-made turbines and components and will also bolster both offshore and land-based wind energy projects.
According to the AWEA, the PTC has helped the wind industry pump more than $15 billion in private investments into the American economy annually for the past five years, growing the manufacturing sector through the production of almost 500 wind energy-related facilities.
Specifically, the PTC reduces the amount of taxable income for qualified owners of renewable energy projects based on kilowatt-hour, grid-connected electricity output, amounting to 2.2 cents per kWh over the first 10-year period that an approved utility-scale turbine facility is in operation.
"Just simply, 30 percent of the value of a project is derived from the tax credit," said Florian Zerhusen, CEO of WKN USA, a San Diego-based wind developer.
BACK ON TRACK, AT LEAST FOR NOW
"We believe that factories that had a lack of orders for 2013 will start to get orders as contracts are signed and as development companies agree with utilities that they're going to provide more wind energy," said Kelly. "It may take a few months; it won't be an instantaneous call back."
So wind developers can go invest in wind projects this year. But the whole wait-and-see drama will begin again as 2013 draws to a close. In the long run, this is no way to run a business—or a country trying to get off its dirty oil addiction. Worryingly, foreign wind manufacturers, acknowledging the lack of a mature wind industry in America, have shifted their investments overseas. In May of last year, for example, the global wind giant Gamesa abandoned plans for a wind project in Virginia and moved its interest to Spain's Canary Islands.
"The fact is, Virginia and Gamesa did their parts," said Virginia governor Bob McDonnell. "But this project will not move forward due to the ongoing lack of a true national energy policy and a global market that has become more difficult for offshore wind the past few years. That is disappointing."
For supporters of renewable energy, the one-year extension of the PTC was a victory that required untold man-hours and funds lobbying in Washington, not to mention the public outpouring of support in the form of petitions and letters to Congress. But do we have to go through this every year? Do wind sector workers have to get laid off every year? Do wind installations have to pause in mid-construction? These annual Capitol Hill battles miss the larger picture: We don't have a long-term American policy that moves the country to a low-carbon economy. Somehow, that idea is seemingly gone with the wind.
Peter Kelley. American Wind Energy Association. Email received December 13, 2012.
Yelena Viner. American Wind Energy Association. Email received January 2, 2013.
United States Department of Energy. Utility-Scale Land-Based 80-Meter Wind Maps. windpoweringamerica.gov. September 12, 2012. Accessed January 8 2013.
Katie Parrish. Oceana. Email received September 5, 2012.
Union of Concerned Scientists. Production Tax Credit for Renewable Energy. ucsusa.org. January 4, 2013. Accessed January 8, 2013.
Power of Wind. Save USA Wind Jobs. January 12, 2012. Accessed January 8, 2013.
Wind Energy - The Facts. "blank">Supply Chain Key to Delivery. wind-energy-the-facts.org. November 1, 2008. Accessed January 8, 2013.
Jenna Goodward and Mariana Gonzalez. Bottom Line on Renewable Energy Tax Credits. World Resources Institute. October 2010. Accessed January 8, 2013.
K. Kaufman. 'Fiscal cliff' deal includes extension to tax credit for wind industry. The Desert Sun. mydesertsun.com. January 1, 2013. Accessed January 8, 2013.
Rebecca Williams. Congress extends production tax credit for wind. Michigan Public Radio. michiganradio.org. January 8, 2013. Accessed January 8, 2013.
Steve Szkotak. Wind giant Gamesa passes on Va. wind project. Bloomberg Businessweek. businessweek.com. May 7, 2012. Accessed January 8, 2013.
image: On the 35th anniversary of Earth Day 2005, the Department of the Navy debuted its largest wind energy project to date—four 275-foot wind turbines with blades spanning 177 feet, making them visible throughout the base and surrounding areas of Cuba. The wind energy project saves taxpayers $1.2 million in annual energy costs, reduces the consumption of 650,000 gallons of diesel fuel and reduces air pollution annually by 26 tons of sulfur dioxide, 15 tons of nitrous oxide and greenhouse gas emissions by 13 million pounds per year. (credit: US Navy, Kathleen T. Rhem, Wikimedia Commons)