The US wind industry, seeking to prolong its decade-long construction boom, wants renewable energy subsidies added to any deal between Congress and the White House that extends a payroll tax cut through the rest of this year.
“This is our best chance to get this done,” says John Purcell, a vice president at Leeco Steel, a Chicago-area company that makes the steel used in wind-turbine towers. “It’s today, it’s this payroll tax cut bill.”
President Barack Obama and US lawmakers are locked in negotiations over the continuation a 2% payroll tax cut and jobless benefits for the long-term unemployed. They are seeking to extend the tax cut and jobless aid through the rest of the year, at a cost of about $150 billion, and have until the end of the month to reach a deal.
At the same time, the clock is ticking for one of the wind industry’s most important incentives. The federal renewable electricity production tax credit, worth as much as 2.2 cents per kilowatt-hour, is due to expire at the end of this year. If there is a payroll tax deal, it may be one of the last major pieces of legislation to pass before November’s election, so getting the PTC extension added is vital, according to Peter Kelley, a vice president at the American Wind Energy Association.
“Effectively it needs to happen in the payroll tax extension,” Kelley said at an AWEA conference in Washington. If Congress waits until a lame-duck session after the election to renew the PTC, many new wind projects will be cancelled in the interim and thousands of workers will be laid off, Kelley says. “Later will be too late.”
Construction of new wind turbines in the U.S. has surged in the past decade. Since the early 2000s, the nation’s wind capacity jumped from roughly 4 gigawatts to more than 40 gigawatts, according to the Energy Information Administration. Wind turbines are now the number-two choice for newly built power generation, behind plants that run on natural gas.
About 75,000 U.S. jobs are directly and indirectly tied to manufacturing these turbines and installing them at wind farms, according to AWEA. While wind farms currently generate about 3% of U.S. electricity, AWEA says the industry is on track to increase its share to 20% by 2030.
The wind boom has been fueled by a combination of state-level mandates and federal subsidies. More than half the states have renewable portfolio standards, which set targets for electricity generation from wind turbines and other low-pollution sources. Federal wind-energy subsidies, mostly in the form of tax breaks, totaled almost $500 million in 2007, according to the EIA. In 2010, they ballooned to $5 billion, the EIA says, due to temporary programs in the $840 billion economic stimulus law, which passed at the start of the Obama administration.
The renewable electricity PTC predates the stimulus. It was first enacted in 1992, and temporarily expired in 1999, 2001 and 2003. On those three occasions, wind farm construction crashed by more than 70% in the year following the expiration, according to AWEA.
An AWEA-commissioned study by Navigant Consulting predicts similar consequences if the PTC expires at the end of 2012. Total investment in new wind projects will drop from $15.6 billion to $5.5 billion and 37,000 jobs supported by the industry could be lost in 2013, according to Navigant.
“We need stable tax policy to keep this success story going,” AWEA’s Kelley says.
Extending the PTC will cost the federal government about $1 billion a year, according to the Joint Committee on Taxation. That pales in comparison to the hundreds of billions of dollars spent on “90 years of incentives for other forms of energy production,” such as coal, oil, natural gas and nuclear, Kelley says.
Two Republican governors, Terry Branstad of Iowa and Sam Brownback of Kansas, have urged Congress to include the PTC extension in any deal on the payroll tax cut. Some business groups, including the Edison Electric Institute and National Association of Manufacturers, have joined wind-energy companies, environmental groups and the farm lobby in calling for a four-year extension of the renewable tax break.
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