National Wind Watch: Wind Energy News » Wind power tax credit resurrected

A measure rejected last week by the U.S. Senate that included tax credits for energy production from commercial wind turbines has a new life.

But its fate and the fate of other subsidies for renewable energy sources like the proposed Nantucket Sound wind farm are still up in the air.

Sen. Scott Brown, R-Mass., joined a bipartisan group of senators Thursday who proposed legislation that would extend the production tax credit. Wind-energy developers say this is crucial to their industry.

The measure introduced Thursday must be attached to other legislation in order to pass in the Senate. It separates the production tax credit from an investment tax credit and a controversial loan program that has been sharply criticized by Republicans following the bankruptcy of the solar energy company Solyndra, which had received $535 million through the loan program.

The tax credit – set to expire at the end of the year – provides 2.2 cents credit per kilowatt-hour of energy produced in the first 10 years of a wind-energy facility’s operation.

Although Brown and Sen. John Kerry, D-Mass., previously called for the passage of the production tax credit, Brown voted against a failed transportation bill amendment last week that included the tax credit bundled with other incentives. The amendment failed to get the 60 votes required to be included in the transportation bill.

In a statement emailed to the Times, Brown said he believed in an “all-of-the-above approach to America’s energy challenges. The extension of this tax credit will help make sure that we continue to diversify our energy supplies over the long term.”

In an email statement sent to the Times, Kerry said the imminent expiration of the tax credit program has already had a chilling effect on the wind industry.

“Fixing this mess requires leadership not just words,” Kerry said. “We could’ve gotten this done last week if folks on the other side of the aisle who have supported the tax credits forced their party’s leaders to bend. Our industries took one on the chin and we need to get this right.”

The measure introduced Thursday would extend the production tax credit for an additional two years. Wind-energy supporters have long argued that the tax credit should be extended on a long-term basis.

Since it was first passed in 1992, the production tax credit has expired three times making it difficult for wind energy developers to plan, 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..

Nuclear and fossil fuels enjoy much greater and more stable subsidies than wind and other forms of renewable energy, he said. But, given the current political environment, even wind-energy supporters are preparing for the day when the tax credits permanently expire.

“We’re not looking for some subsidy stretching out into forever land here,” Wentworth said.

Wind industry advocates say the production tax credit is critical to save 37,000 U.S. wind manufacturing jobs that will otherwise be lost in the next year.

“Renewal of the (production tax credit) this year is vital for the wind industry,” said Washington, D.C.-based wind industry lobbyist David Tamasi. “It’s essential to protect jobs but also to allow for the expansion of wind energy here in the U.S.”

Wind energy projects typically have a 10-month lead time for planning and development which is why there is such a push to extend the tax credit earlier in the year, Tamasi said.

The industry is optimistic that the investment tax credit and loan program will be extended before the end of the year, Tamasi said.

“Our No. 1 priority is extending the federal production tax credit given the immediate urgency of this extension to tens of thousands of jobs in the land-based sector,” American Wind Energy Association officials said in a statement emailed to the Times.

Both National Grid and NStar have agreed to buy power from Cape Wind and the tax credits go a long way in determining the cost of that power. If Cape Wind fails to qualify for the investment tax credit, the price of its power will increase from 18.7 cents per kilowatt-hour to 22.8 cents, according to a power purchase agreement with National Grid.

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.

This price is the cost to the utilities and not the end customer. The average National Grid residential customer is expected to pay an extra $1.50 per month for Cape Wind’s power. But customers who use more electricity, such as businesses, are expected to pay higher amounts.

NStar, which distributes power on Cape Cod and Martha’s Vineyard recently agreed to buy about a quarter of the project’s power as part of a merger proposal between the utility and Northeast Utilities. That deal is expected to largely mirror the National Grid agreement although the impact on customers is expected to be less based on the ratio of power being purchased to the utility’s overall energy supply portfolio.

“They all obviously play a helpful role in project financing,” Cape Wind spokesman Mark Rodgers said about the various incentives for the industry.

One of the frustrations for wind energy developers in the debate over tax credits and other subsidies is that people often ignore the far greater support given to fossil fuel and nuclear projects, Rodgers said.

“The support for fossil fuels and nuclear are baked in,” he said. “They don’t sunset. They draw a lot less attention but they’re there.”