Congress is taking the wind out of turbine sales.
And that’s despite support from President Barack Obama, the U.S. Chamber of Commerce and a substantial roster of House Republicans who see extending the wind tax credit as an electoral imperative.
Rep. Dave Reichert (R-Wash.) is so frustrated he’s thought about trying to go over House Ways and Means Chairman Dave Camp’s head to get legislation moving.
The credit doesn’t expire until the end of this year, but turbine makers are already feeling pain because developers can’t afford to lay bets that Congress will sort it out later.
The bottom line: It takes a long time to get projects up and running, and, amid tight budgets, subsidy scandals and election-year politics, there’s no guarantee that this tax break will catch a tailwind in time to avoid a crippling interruption in production.
On one level, the wind credit is just another casualty of the ongoing tussle between conservative budget hawks who want to rein in government spending and business-minded Republicans who support subsidizing industrial innovation. But what makes this tax break unusual is the damage that’s already being done – and the possibility that inaction could devastate an industry that Congress has propped up for two decades.
“It’s a horrible way to do business,” Rep. Steve LaTourette (R-Ohio) said. “But that’s the way the place works.”
Months of pushing, lobbying and counting votes has led nowhere, even though the credit is backed by Democrats and a long list of Republicans, including moderates such as Rep. Charlie Bass of New Hampshire and wind-state conservatives such as Rep. Steve King of Iowa and Sen. John Thune of South Dakota.
The production tax credit is not permanent and must be renewed periodically, unlike some provisions for the oil and gas industry. It was created in 1992 to provide incentives for the wind industry, which at the time was relatively tiny, but within the last decade, wind power has picked up speed at an almost exponential rate.
The U.S. had about 1.4 gigawatts of wind energy in 1997, the first year for which the American Wind Energy Association has records. That number has since ballooned to about 47 gigawatts.
It now costs the government more than $1 billion a year to hand out 2.2 cents per kilowatt-hour of wind power – and enough is enough, says Rep. Mike Pompeo (R-Kan.).
“We’ve been subsidizing some of these industries with tax credits for multiple decades, and every time they get to the end of the line, they get within a year, they say, ‘If you just give me’ – fill in the blank – ‘one more year, four more years, that’s all I want. Just a little more time,’” said Pompeo, who is leading a charge against the PTC and other energy subsidies.
“What history would demonstrate is they would continue to come back to the federal trough and ask for more time yet again at the end,” he added.
On the other hand, if the credit runs out on schedule, it would crater new installations and – even more important in a political atmosphere where all policy is measured in terms of employment – slice the industry’s roughly 75,000 jobs in half, according to trade group projections.
It has happened before: The PTC has expired three times since 1992, most recently in 2004, and was revived each time by Congress. 2004 saw a 77 percent drop in new installed wind power.
Elizabeth Salerno, AWEA’s data guru, says no plans exist for new wind projects in 2013.
Projects could be announced later, she said, but the time it takes to construct the massive turbines means that it’s essentially now or never – as indicated by an AWEA chart that shows the time it takes to construct and deliver the massive turbines so they can be installed by Dec. 31.
“The window of when the turbine order needs to be placed in order for it to get delivered on time for a 2013 completion is closing,” Salerno said. “If you get a PTC extension in December, the damage is done.”
While that means a drop-off in new wind power, many on the Hill are even more concerned with another implication: layoffs.
“What’s happening right now, when I meet with the PTC people, the wind people, they are already ratcheting down,” said Reichert, who is leading a House effort to save the credit. “They’ve used all their money, they’ve built all the things they can build, and now they’re starting to lay people off, preparing for no money for the rest of the year.”
For example, Iberdrola Renewables laid off 25 people from its Portland, Oregon, office in January, pinning the layoffs in part on not knowing whether the tax credit will be extended.
Turbine manufacturer Vestas, the second-largest turbine producer in the U.S., said earlier this year it will decide by the fourth quarter whether to lay off 1,600 U.S. workers unless the PTC is extended.
“While the industry waits on Congress to act, it’s damaging to the economy, it’s damaging to people who earn a living in wind, and it makes it less likely that states across the country who have renewable energy standards like mine can meet those standards over time,” Kansas Republican Sen. Jerry Moran said.
Nationally, wind provides about 2.9 percent of grid electricity. In Moran’s home state, however, wind makes up 8.3 percent, and in South Dakota wind provided 22.3 percent of electricity last year, according to the AWEA’s 2011 annual market report.
Waiting for a tax extenders package, when the measure’s cost might seem more manageable amid other tax provisions, is also a gamble. Congress often takes up expiring provisions at the end of each year, but it failed to do so in 2011 while lawmakers engaged in partisan bickering over the payroll tax cut and Keystone XL pipeline.
Whether Congress takes up such issues later this year is anyone’s guess, particularly after an election that could see one chamber’s control switch parties.
“It should have been done months ago,” Moran said. “It’s better to do it now than it would be to do it in December. It’s better to do it in December than not to do it.”
Efforts to attach the credit to other potential vehicles – the initial payroll tax cut extension and transportation packages, for example – have fallen flat, blocked by Republicans or crowded out by other issues.
Even with various Republicans on board with extending the PTC, some Democrats still point their fingers squarely at GOP dogma.
“There is, within Republican ranks, hostility toward federal assistance for renewables,” said Rep. Sander Levin (D-Mich.), the ranking member on the Ways and Means Committee. “They think we’re picking winners and losers. Trouble is if we don’t help, all of the hardware is going to come from China: solar, wind turbines.”
“I’m hopeful, but I have a question in my mind because they’ve opposed renewable fuels,” said Rep. Henry Waxman of California, the top Democrat on the Energy and Commerce Committee. “It should be different. But you never know what they’re thinking.”
Pompeo says the industry will do fine on its own.
“The program has been around an awfully long time and it’s time to let that industry stand on its own two feet. And I’m confident that they’ll do it,” he said. “There’s great, creative engineers and innovators in the alternative energy field, and I’m confident they’ll be successful.”
Reichert – a Republican who sometimes breaks with his party on energy issues, including voting for the Waxman-Markey cap-and-trade bill in 2009 – said he too has found resistance from the right.
“I do get some pushback from the far, far right, who think that [wind is] only 1 percent of our total energy,” he said. “But as Steve [King] was saying, it’s 20 percent of the energy in his state, so there’s potential there.”
Reichert, a member of the Ways and Means Committee, has been working with Camp to find a vehicle for the PTC extension before the end of the year. That would be an exception to the rule that tax issues are typically handled all at once, he acknowledged.
“This is one that I think there’s an emergent need to handle now,” Reichert said. “So that’s been our mantra and we’re going to continue to push that.”
As for approaching leadership directly, Reichert said he’s not ready to make that move – though he didn’t rule it out.
“I’m not going to go over Camp’s head quite yet,” he said.
This article first appeared on POLITICO Pro at 5:32 a.m. on April 24, 2012.
NWW note: Reichert ($2500 2010, $7500 Q1 1012), Bass ($2000 2010), Thune ($1000 2008, $2500 2009, $5000 2010, $2000 2011), Moran ($759 2011), Levin ($250 1998, $1000 2010, $1000 2011, $1000 Q1 2012), and Waxman ($2500 2009) have received donations from the American Wind Energy Association’s WindPAC.
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