Wind energy plan hinges on tax credit; Expansion may halt unless Congress extends program into 2009, some say
A federal clock is ticking on an ambitious Texas Public Utility Commission plan to build transmission lines to funnel wind energy from West Texas to metropolitan areas.
The wind energy industry revolves around a production tax credit that expires Dec. 31. After more than one false start, there is no guarantee Congress will extend it.
Expansion will halt, some warn, if lawmakers don’t take action this summer.
“We don’t want lines to just be standing out there,” Sweetwater Mayor Greg Wortham said of the planned transmission lines. Wortham is also director of the West Texas Energy Consortium.
Until a turbine is producing juice – no credit.
A wind facility with utility-scale turbines rates a production tax credit of 2 cents per kilowatt-hour of electricity produced – if the facility is in service after Dec. 31, 1992, and before Jan. 1, 2009, according to the American Wind Energy Association.
The credit lapsed in 1999, 2001 and 2003.
Those lapses resulted in a drop off of 70 percent to 90 percent in investment, said Jaime Steve, legislation director for AWEA.
This time around, 76,000 jobs and about $12 billion in investment hinge on swift action from Congress, he said.
Hesitation in extending the credit endangers jobs in manufacturing, production and ports across Texas ranging from West Texas to Corpus Christi, Wortham said.
Lawmakers’ on-again off-again approval of the credits affects expansion in other ways.
“We’re losing manufacturing opportunities, particularly from Europeans who want a consistent policy,” Wortham said.
The state has done its part, he said. The PUC is set to move forward with a $4.93 billion investment in a new network to transmit 18,456 megawatts of wind energy from West Texas and the Panhandle, a PUC news release said. That shakes out to about $4 a month per residential customer after lines are built and in service in four to five years.
The project will rocket Texas past Germany, making the Lone Star State the biggest wind energy producing “nation,” Wortham said.
But industry development could snag on Congress and the tax credits.
“I don’t know how many times they’ve been voted down this year,” Wortham said.
After a few years of sustained existence, he thinks the credit is in danger of slipping past the deadline without renewal again.
“There’s just been this stalemate,” Wortham said.
For instance, the three Republicans representing the Big Country voted against House Resolution 5351 even though it extended the tax credits.
The proposal also rolled back tax breaks for the biggest oil companies to drum up $18 million for alternative energy tax incentives, including the wind energy production tax credit.
“It has been on a few vehicles that unfortunately were pieces of legislation that did not pass because they included new taxes to offset those credits,” said U.S. Rep. Randy Neugebauer, R-Lubbock, of the 19th Congressional District.
Neugebauer, U.S. Rep. Mac Thornberry, R-Clarendon, and U.S. Rep. Mike Conaway, R-Midland, fear the taxes would put a damper on energy production.
Steve, who believes lawmakers must extend the credit by August to nurture investment, was optimistic to a point.
“We’re convinced that Congress wants to pass an extension of the production tax credit,” he said. “The question is when are they going to do it.”
Wortham is impatient with energy bill battles between Democrats and Republicans.
“There needs to be a bill that says we can drill for oil, we can build refineries, and we need 10 years extension on the wind production tax credit,” he said.
Wortham favors the “No More Excuses” energy bill floated by Thornberry of the 13th Congressional District.
His legislation would extend the wind energy production tax credit by 10 years, but it hasn’t made it onto the floor of the House for a vote despite strong backing from GOP leadership.
Thornberry said extending the tax credit is crucial, noting that one- or two-year extensions make it difficult for companies to plan big investments.
“When you add the transmission lines on top of it, you’re talking an even bigger investment,” he said.
Conaway of the 11th Congressional District said he thinks Congress will extend the credit before the end of the year.
“I’m supportive of an extension for, say, three years to make sure we get the wind built out,” he said.
Neugebauer said a five- to 10-year extension is appropriate.
By Trish Choate
18 July 2008
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