Two days after the U.S. Senate rejected a measure that included tax credits for the production of energy from wind and other renewable resources, the provision has new life.
U.S. Sen. Scott Brown, R-Mass., joined a bipartisan group of senators Thursday to introduce legislation that would extend the production tax credit, which wind-energy developers say is crucial to their industry.
The tax credit provides 2.2 cents credit per kilowatt-hour of energy produced in the first 10 years of a wind-energy facility’s operation.
Brown voted against an amendment to a transportation bill earlier this week that included the tax credit along with other provisions, but he and Sen. John Kerry, D-Mass., had previously called for the production tax credit’s passage.
The vote on the amendment Tuesday was 49-49, shy of the 60 votes needed to be included in a transportation bill before the Senate.
The newly introduced measure, which will likely be attached to other legislation, separates the tax credit from a controversial federal loan program that was sharply criticized following the bankruptcy of the solar energy company Solyndra, which had received $535 million through the program.
The measure would extend the production tax credit for an additional two years. Wind-energy supporters have long argued that the tax credit should be permanent but with a growing consensus around eliminating subsidies for all forms of energy production, the proposed extension could be one of its last.
Since the temporary production tax credit for wind was first passed in 1992, it has expired three times, Union of Concerned Scientists deputy legislative director Marchant Wentworth said Thursday.
“You can’t turn off and on a supply chain and expect it to be on automatically,” he said of the difficulties faced by the wind-energy industry because of the credit’s temporary nature.
Nuclear and fossil fuels enjoy much greater subsidies than wind and other forms of renewable energy, he said.
But even wind-energy supporters are preparing for the day when the subsidy no longer exists.
“We’re not looking for some subsidy stretching out into forever land here,” Wentworth said.
I wrote most of the above for the paper but it hasn’t made it in yet. The production tax credit is potentially important for the proposed Nantucket Sound wind farm if another type of credit meant to encourage investment is not available. According to the power purchase agreement the company has to sell half of its power to National Grid – which NStar and Cape Wind are expected to more or less copy to cover the 27 percent of the project’s power NStar plans to buy – the cost of Cape Wind’s power will increase from 18.7 cents per kilowatt hour to 22.8 cents if the project fails to qualify for the investment tax credit. If the project fails to qualify for both the investment tax credit and production tax credit, the cost of the power would rise to 23.5 cents per kilowatt hour, according to the contract.
Just a friendly reminder because people often get confused: This isn’t the price customers will pay for the power but rather the cost to the utilities. They will then mix that power into their energy portfolio, essentially averaging the cost of Cape Wind’s power along with other, lower cost, power. That’s why they can say the bill for an average National Grid customer who uses 618 kilowatt hours per month, for example, will only increase by about $1.50. Opponents argue, correctly, that businesses that use more electricity will pay more. Conversely people who use less will pay less. In my admittedly small home we use about 200 kilowatt hours per month on average.
I know opponents of wind energy projects were pretty happy when the amendment including the production tax credit, investment tax credit and cash grant program went down. They probably still have a chance to fight on the last two of these but the production tax credit appears to enjoy pretty hefty bipartisan support.
From what I can tell the investment tax credit is not included in the proposal by Brown et al and will have to be dealt with separately, along with the cash grant program. Check the paper or back here later for more on this.
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