Congress’ failure to include a renewable energy tax credit in the much-touted energy bill passed late last year could chill wind-farm development in the Columbia River Gorge and elsewhere, industry and utility leaders say.
For several years, wind developers have taken advantage of a tax credit based on the amount of energy a project generates. That incentive is to expire at the end of this year.
“Manufacturers need to plan far beyond that,” said Ditlev Engel, chief executive of the world’s largest wind turbine supplier, Vestas Wind Systems of Denmark. Engel was in Portland Wednesday to address the Portland Business Alliance.
The production tax credit has helped fuel three record-breaking years of wind-farm development. The American Wind Energy Association says 5,244 megawatts of wind energy were installed last year, more than double the previous two years combined.
Oregon and Washington have set records with projects along the gorge’s windy corridor.
The production tax credit has been around since 1992, but it has relied on a series of extensions to stay alive. From 1999 through 2004, the credit expired three times, and development dropped dramatically each time.
The credit, adjusted for inflation, stands at 2 cents per kilowatt hour and applies to the first 10 years of a renewable energy facility’s operation. Geothermal and other renewable energy projects can tap the credit, but wind has been the primary participant.
Costs associated with wind energy vary significantly. But the credit can bring the price of wind-generated electricity down to about 5 cents per kilowatt hour. That’s competitive with more traditional forms of energy such as natural gas.
Wind energy advocates say they’re confident they can persuade lawmakers to squeeze the tax credit into an upcoming bill. But they could run into opposition from those who want to shore up the budget and limit subsidies.
Last time around, Republicans balked because the money lost to the production tax credits was to come from cuts to oil and gas industry subsidies.
Sen. Ron Wyden, D-Ore., who sits on the Finance Committee, “will pull all the stops to make it happen,” said his Oregon spokesman, Tom Towslee.
Vestas’ North American headquarters is in Portland, where the company employs about 300 workers. Several wind projects in the gorge use Vestas turbines. The company’s worldwide work force is about 15,500.
Jim Lobdell, a vice president with Portland General Electric, Oregon’s largest utility, has watched over the development of the company’s first wind project, Biglow Canyon, in Sherman County.
The kickoff phase – with 76 Vestas turbines – began operating late last year, and additional turbines are scheduled for installation in 2009 and 2010. “We’re banking on the fact that the production tax credit will be extended,” Lobdell said.
PGE remains committed to the project, even if the tax credit expires. In part, that’s because a new state law requires PGE and other Oregon utilities to steadily increase their renewable energy holdings until, by 2025, clean resources account for 25 percent of the electricity delivered to customers.
Without the tax credit, “we’ll have to step up the costs associated with development,” Lobdell said. That means higher rates for customers.
Wind energy isn’t the only renewable resource to get the cold shoulder in the federal energy bill. An investment tax credit that the solar industry used was sliced in last-minute political wrangling.
The investment tax credit amounts to 30 percent of the value of qualified residential or commercial solar equipment. It’s set to revert to 10 percent at the end of this year. Unlike the production tax credit, the solar tax break is a one-time payment at the beginning of a project.
“We count on that credit to make the deal happen,” said Sandra Waldren, director of Commercial Solar Ventures, a Portland company that helps put together financing for certain types of solar projects.
Waldren said her company has a long list of projects in the works but has “cut back to those we think we can absolutely finish by the end of this year. Everything else is on hold or has been dropped.”
Big wind-industry players such as Vestas aren’t yet cutting back. The company will open its first U.S. manufacturing plant in March in Colorado and will decide on a location for a U.S. research and development facility this year.
By Gail Kinsey Hill
17 January 2008
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