Future federal funding for renewable energy projects – from federal tax credits for home solar panels to hefty subsidies for the $100 million project to build wind turbines in Lake Erie – could be in jeopardy after the Democratic congressional lawmakers’ big loss in Tuesday’s election.
Subsidy programs will have to compete with other funding priorities, said John Engler, the head of the National Manufacturers Association and former governor of Michigan.
“We are going to see Congress look at a lot of things,” he said in answer to a reporter’s question about a treasury grant program that allows a tax credit or cash grant of 30 percent for renewable energy projects.
The cash grant program for renewable energy projects expires at the end of the year, unless Congress renews it.
“I think all of those programs are going to get measured,” said Engler. “There is no question that there will be a lot of fiscal focus. And I think it will be bipartisan.”
Engler’s comments are consistent with the association’s position that renewable energy should not be subsidized but should compete on its own merits.
The solar and wind industries have argued that traditional fuels have hidden subsidies in the form of tax credits and the new technologies cannot initially compete without a jump-start. They fear the surge in new solar and wind projects will sputter – and along with it, new jobs – if the subsidies are ended too soon.
The Lake Erie Energy Development Corp. sees the first five turbines built at an estimated cost of $100 million as a demonstration project. And LEEDCo says it has the support of the Ohio Manufacturers’ Association, which sees plenty of jobs in such an undertaking.
LEEDCo’s long-term goal is to build hundreds, if not thousands, of turbines in the lake, creating an industry concentrated in northern Ohio that would build the turbines and the myriad parts that go into them.
The argument is that a mass installation will reduce the cost of the turbines over time and therefore the cost of the power that the turbines generate.
“We realize we have to stand on our own,” said Lorry Wagner, president of LEEDCo. “We are not asking for anything special. We are saying just give us a chance to compete. The goal is to be able to apply for existing federal money, compete for that money, and win it.”
General Electric Co. has agreed to supply the turbines. The Bechtel Corp. and other private companies have been chosen to build the initial project and have agreed to invest an unspecified amount of money in the project.
“They are our private equity partners, GE, Bechtel and others. They are interested in it because they think they can make money,” said Wagner.
But until giant wind farms are built in the lake, the cost of the power will be expensive.
And that means, said Engler, that somebody is going to be picking up the extra cost of the wind-generated power.
“I am bothered by the fact that Gov. John Kasich or Gov. Rick Snyder, the two new governors in Ohio and Michigan, would immediately say to any business seeking to locate in the state, ‘We’ll give you a competitive rate,’ ” said Engler.
That means either the federal government would be paying the cost between the price of power from wind and coal, or the ratepayers, he said.
“The competitive environment that we are in makes it really hard to hide very expensive subsidies,” Engler said. “Somebody is going to get stuck for them. I think if you take the position that as long as the federal government is paying for them, it’s fine,” but that train has stopped.
Wagner said the issue comes down to this: “Off-shore wind is going to happen. The question is will it happen here or in China. If it’s China, we will be buying from them.”
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