While for many its a time of celebration, this holiday season is making many in the wind industry nervous.
The production tax credit (PTC) for wind energy–the primary federal financial support mechanism for wind, which rewards developers and investors with 2.2 cents per kWh over 10 years–is set to expire in just about a year, on midnight December 31, 2012.
On Monday, the American Wind Energy Association (AWEA) released a study conducted by management consulting firm Navigant, which claims that extending the tax credit will save 54,000 American jobs in the next four years and create 17,000 new ones. Allowing it to expire will cut jobs in the industry by a half, the study says.
And time is short, AWEA said in a statement: “For the purposes of the American wind industry manufacturing sector, which needs lead time to make its products, the PTC effectively expires at the end of the year.”
The tax credit has been hugely important to the nascent sector that is also competing with international manufacturers like Spain and China that have hefty state support and lower production costs.
“The goal of the tax credit: is the more we build the cheaper it will become. That has been borne out over time,” Richard Caperton, a senior policy analyst with the energy opportunity team at the Center for American Progress think tank recently told AOL Energy. “Wind is a very healthy industry that is viewed as a mainstream investment by utilities. It’s been very effective.”
Under the American Recovery and Reinvestment Act 2009 (better known as the stimulus), $2.3 billion was set aside in tax credits for advanced energy manufacturing. It provided a 30% tax credit for investments in 183 manufacturing facilities across 43 states, generating more than 17,000 jobs, according to the Treasury.
But now, with an expiration date on the PTC on the horizon, industry leaders say that customers are hesitating to buy wind power.
“An immediate extension is needed to support the investment we have made in our operations and secure the jobs that have been created,” said CEO of Winergy Drive Systems Corporation Terry Royer.
But AWEA warned that with “a job-killing tax increase on the horizon and the PTC’s future uncertain, businesses are hesitant to plan future US wind projects, American manufacturers have seen a drop in orders, and layoffs have already started.”
“The wind industry is facing the recurrence of the boom-bust cycle it saw in previous years when the PTC was allowed to expire,” the AWEA statement said. “In the years that followed expiration, installations dropped between 79 – 93%, resulting in major job losses.”
[NWW note: The AWEA’s emphasis on the PTC may be serving to distract from their more urgent push to extend the “Section 1603” investment tax credit, which expires at the end of 2011. In 2010, the ITC paid out more than two-thirds of the $5 billion dollars of federal subsidies given to the wind industry.]