Wind industry on hold
Credit: By Lisa Hagen and Joel Senick SPECIAL TO THE TELEGRAM & GAZETTE | Monday, October 8, 2012 | www.telegram.com ~~
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WASHINGTON – Members of the Massachusetts congressional delegation are hopeful two federal tax credits designed to boost wind energy production will be extended when Congress reconvenes in November – a decision that could affect thousands of wind energy jobs in the Bay State.
As of this year, there were 8,250 wind industry jobs in the commonwealth, according to the Massachusetts Clean Energy Center, a state agency. While it is unclear how many of these Massachusetts-based jobs would be at risk without the tax credits, wind energy advocates have warned that about one-half of the nationwide jobs in the wind energy industry could disappear if the tax credits are not renewed.
The federal production tax credit and investment tax credit for wind energy are both set to expire at the end of the year, unless Congress takes action to extend them. Both were created under the Energy Policy Act of 1992.
The PTC provides developers with a tax credit of $22 per megawatt hour of power generated, while the ITC generally accounts for 30 percent of the cost of the facility – thereby helping to make the cost of wind energy to the consumer more competitive with traditional fossil fuel-generated electricity.
The latter factor helps to explain why the renewal of the credits has been an increasingly controversial – and partisan – issue in recent months, with conservatives arguing that the government should not be picking favorites in the economic marketplace.
In mid-September, 47 House Republicans signed a letter urging House Speaker John Boehner, R-Ohio, to let the PTC wind credit expire and not bring up legislation to renew it. On the other side of the partisan divide, President Obama has pushed for the tax credit extension during campaign stump speeches as part of an effort to increase reliance on renewable forms of energy.
Although he initially voted in March against an amendment to extend the wind credits, the one Republican in the Massachusetts congressional delegation, Sen. Scott Brown, now supports continuing the program, according to a spokesman. That amendment was ultimately rejected in the Senate on a 49-49 vote. (The bill to which the amendment would have been attached cleared the Senate, but failed to become law after not being taken up by the House.)
“Sen. Brown believes the wind PTC plays an important role in further developing wind energy resources, which are part of the all-of-the-above approach to energy production,” Mr. Brown’s press secretary, John Donnelly, said.
U.S. Rep. Niki Tsongas, D-Lowell, a member of the House Sustainable Energy and Environment Coalition, noted the increasing reliance on wind energy in her district and other areas of the state. She contended in a recent statement on the House floor that the credits’ extension would contribute to job creation in the state.
“Now, 60 percent of the average turbine is manufactured here in the U.S.,” Ms. Tsongas said. “These companies hire skilled and unskilled workers, and provide good paying jobs in a rapidly growing sector of our economy.”
Job numbers in wind energy have recently risen in Massachusetts: The current 8,250 jobs represent a 44 percent increase from a year ago, according to the state’s Clean Energy Center, created in 2008 to invest in early stage renewable energy firms.
However, the looming possibility of expiring tax credits creates an unstable environment for wind energy developers across Massachusetts and the country, said Tom Michelman, co-founder of Arlington-based Boreal Renewable Energy Development.
“Manufacturing firm after manufacturing firm are laying off people because no one’s purchasing wind turbines for wind farms across the country,” Mr. Michelman said.
Ellen Carey, a spokeswoman for the Washington-based American Wind Energy Association, reiterated this concern. The industry has been experiencing layoffs because of the uncertainty of the credits, which reduces the orders for wind turbines, she said.
Overall, wind still accounts for a small percentage of the nation’s energy generation.
In Massachusetts, Gov. Deval L. Patrick’s administration has set a goal of 2,000 megawatt hours of electricity generated through wind energy by 2020.But, so far, only 3 percent of the goal has been met, according to the Clean Energy Center.
Wind developers in the commonwealth can also use state grants to help get their projects off the ground. Since Jan. 1, 2011, the Clean Energy Center has invested $5.7 million in the early stages of wind project development, said spokeswoman Catherine Williams.
“Our incentives are a nice complement to the federal incentives,” Ms. Williams said.
Even though the extension of the federal wind tax credits is uncertain, some large developments will be constructed regardless of what happens on Capitol Hill. In the Nantucket Sound, Cape Wind, the largest wind energy project in Massachusetts, will “continue to move forward while policy makers debate” the credits, said spokesman Mark Rodgers.
Other wind energy projects have gone forward without federal or state assistance. The Berkshire Wind Power Project, the state’s largest operating wind farm, did not receive any incentives because they are a non-profit company, said spokesman David Tuohey.
Holy Name Central Catholic Junior/Senior High School in Worcester also did not receive tax benefits for a wind turbine it installed in 2008 because of its tax-exempt status, said Kevin Schulte, who oversees its operation. But Mr. Schulte said the credits’ expiration would affect other projects his company oversees.
“The expiring tax credits impede new growth and have slowed or stopped development on projects all across the state,” said Mr. Schulte, owner and chief executive officer of Sustainable Energy Development.
But, even with widespread governmental assistance, there have been instances in which wind energy generation has been something short of a success story. A wind turbine in Princeton, constructed in 2009 with the aim of reducing electrical costs for Worcester area residents, has instead been losing money, according to the Princeton Municipal Light Department.
Brian Allen, general manager of the Princeton Municipal Light Department, said the potential expiration of the tax credits would only affect new projects, not existing projects such as the Princeton turbine.
Several of the arguments against extending the credit were recently voiced in an analysis by the NorthBridge Group, a Boston-based economic consulting firm – which argued that the credit distorts the energy marketplace through “negative pricing,” while discouraging efforts at efficiency. Wind producers have no incentive to curtail their energy output during low demand hours, because they still receive a positive economic gain from the PTC, the analysis contended.
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