Wind energy companies are hoping for quick action on a tax credit affecting their industry when congress resumes work later this month. The credit is set to expire at the end of this year. The organizer of a wind project in western Minnesota says that is creating uncertainty which could slow development of Minnesota’s growing wind production.
Worthington, Minn. – The so-called production tax credit may seem like a small item: Two cents for every kilowatt hour of electricity produced. But for wind developers like Brent Olson it is the extra financial boost which can swing a wind farm from loss to profit. He was disappointed when Congress decided against extending the credit in December’s energy bill.
“I honestly don’t understand it,” says Olson.
Olson has a direct interest in the tax credit. He is helping build a wind farm in Big Stone County. He says 100 local residents have invested in the project and there is a lot of money at stake.
“They put in five grand apiece, up front,” says Olson. “With a potential, depending upon how the deal is structured, of having to come up with another $15,000 each.”
The total cost of the wind farm is about $30 million. The 10 wind turbines will supply enough electricity for about 5,000 homes. The industry accounts for hundreds of jobs in Minnesota at both wind farms and companies which supply parts for the wind turbines.
Olson says the tax credit is an important component of the wind farm’s financial package. Olson says it would be bad news if the credit is gone when the blades of the Big Stone wind machines start turning next year. Despite the uncertainty, he says the group will forge ahead, trusting that Congress will renew the credit sometime this year.
“That’s the basic assumption, but dumb things happen. Dumb things come out of Washington sometimes,” says Olson.
It is not the first time the tax credit issue has surfaced. Three times in the last decade Congress has let the subsidy expire. Wind supporters say the lapses hurt the industry, even though congress eventually renewed the subsidy each time.
When the tax credit expired at the end of 2003, the construction of new wind farms dropped by 75 percent the next year.
Wind consultant David Norgaard is working on several projects, including the one in Big Stone County. He says the almost yearly debate over the tax credit has slowed the nation’s development of wind energy. He says no one knows how many wind projects have been canceled or delayed because of uncertainty over whether the credit will continue. He says the issue is a constant source of frustration and worry during the planning and construction of a wind farm.
“It’s a tremendous amount of work that has to be put together and it takes years,” says Norgaard. “So for them to start and stop the production tax credit, it does absolutely no one any good that I can imagine.”
Norgaard believes oil and coal companies and other energy competitors may have lobbied behind closed doors against the tax credit. Publicly there’s been little opposition.
The National Mining Association supports using more coal to meet the nation’s energy needs. Officials with the trade association say they do not oppose subsidies for alternative energies like wind. They say they are opposed only to what they call naive projections that wind and other renewable sources will reduce the need for coal.
The debate over the future of the wind tax credit reaches down to the manufacturing level. Officials at the nation’s largest buyer of wind power, Xcel Energy, are concerned the issue may slow the development of companies which supply the individual parts that go into a wind farm.
Xcel Energy vice president Mark Stoering says it is already difficult to find good suppliers. He says uncertainties over the tax credit and the future of wind development further complicates the problem.
“Those manufacturers are strategically planning their business,” says Stoering. “They may adjust their manufacturing schedule, or component schedule, and that supply chain bottleneck can only be exasperated which doesn’t help any of us in the wind development business.”
Most people in the wind industry expect Congress will act soon to extend the tax credit past the end of the year. Brent Olson of Big Stone Wind says that should happen in the next few months. If it does not happen, he and others will scramble to decide how that decision affects their corner of the wind energy world.
by Mark Steil
10 January 2008
|Wind Watch relies entirely
on User Funding