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Wind-power industry hopes to keep subsidy; Production tax credit is set expire at end of 2012

WASHINGTON – The wind-power industry is pushing to get its favorite federal subsidy extended amid concerns that the program’s expiration next year could halt the expansion of the fastest-growing renewable electricity source in the U.S.

For nearly two decades, wind power has benefited from the production tax credit, a federal incentive providing 2.2 cents per kilowatt-hour to companies for new wind capacity for the first 10 years it’s online.

The industry says the credit has helped wind account for 35 percent of all new U.S. power capacity in the last four years while making the zero-emissions source cost-competitive with coal and natural gas.

With the credit set to expire after Dec. 31, 2012, wind energy expansion might slow if a politically polarized and budget-cutting Congress doesn’t approve an extension.

A recent report from IHS Emerging Energy Research, an independent research group in Cambridge, Mass., said expiration would cause wind-power installations to decrease from 5.6 gigawatts a year since 2005 to 2.3 gigawatts a year from 2013 to 2016 and leave wind vulnerable to competition from low natural-gas prices.

“Fundamentally, the industry is not ready to stand alone,” said Matt Kaplan, wind-energy analyst with IHS, whose report says the tax credit has been “fundamental to wind development’s growth since the late 1990s.”

A bipartisan group of 24 governors in July called for extending the credit by up to seven years. Rob Gramlich, senior vice president for public policy at the American Wind Energy Association, said he was optimistic that Congress would act because both parties like policies that provide tax relief to businesses without imposing mandates.

But Rep. Mike Pompeo, R-Kan., told his colleagues in a letter last week that he would introduce a bill to eliminate all energy tax credits. He called his bill “a reasonable approach to ending the decades-long practice of trying to pick winners and losers.”

Texas is the top wind-energy-producing state, with 10.1 of the nation’s 42.4 gigawatts of wind-generating capacity through June 2011, Gramlich said.

Iowa ranks second with 3.7 gigawatts, while California ranks third with 3.2 gigawatts and leads the nation with 1.2 gigawatts under construction.

Wind power in Texas, already buoyed by the tax credit, got a boost in 1999 when Gov. George W. Bush signed a bill mandating that utilities provide a certain amount of electricity from renewable sources. Gov. Rick Perry signed a bill in 2005 strengthening the program.

The requirement, coupled with the credit, provided “certainty there was going to be demand for the wind, so that was attractive to investors,” said Josh Linn, a fellow with Resources for the Future, a Washington-based nonprofit environmental-research group. Texas actually has surpassed the requirement, Linn said.

Wind power set a record earlier this month in Texas for peak generation, hitting a rate of 7.4 gigawatts at one point on Oct. 7.

But wind power faces another hurdle: The industry says it needs more transmission lines to get the power from rural generating facilities to population-dense areas.

Texas “is one of the most proactive states” in adding transmission, Kaplan said. He cited the Competitive Renewable Energy Zones program, through which Texas is adding enough lines from the western part of the state and the Panhandle to eastern cities to increase the state’s wind capacity to 18.5 gigawatts.

“Texas, when it comes to transmission, is clearly the U.S. leader,” said Jimmy Glotfelty, executive vice president of Clean Line Energy Partners, a Houston-based interstate-transmission company with projects outside Texas.