Iowa’s wind energy producers and manufacturers are scrambling to finance new projects in the next two months because they don’t know if the Federal Renewable Electricity Production Tax Credit they rely on will be available after then.
MidAmerican Energy, the nation’s largest wind power generator among rate-regulated utilities, has no plans beyond December to expand its wind energy projects, company media relations manager Tina Potthoff said.
And ACCIONA Wind Power North America, which builds turbines and operates a plant in West Branch, Iowa, probably will shift sales to overseas, company CEO Joe Baker said.
“The short-term renewal strategy creates uncertainty in the market place and an inability to plan long term,” said Baker, who like others in the wind energy business, wants the credit extended beyond its scheduled Dec. 31 expiration.
The uncertainty in this multimillion-dollar industry in Iowa that employs 6,000 to 7,000 workers comes, in large part, from the presidential election, in which Iowa is a highly competitive battleground state with a lot to say about who wins.
President Barack Obama has vowed during his multiple stops in Iowa to fight for a credit. Republican presidential candidate Mitt Romney has said he would let it expire and allow all forms of energy compete on their merits.
“We’ve already seen 600 people get laid off at the major turbine production companies, and that doesn’t even account for smaller manufacturers who aren’t as well known,” said Harold Prior, executive director of the Iowa Wind Energy Association.
Prior predicts that failure to extend the tax credit will stifle wind industry expansion in the short term.
Leader in wind energy
A little more than 2,800 utility-scale wind turbines operate across the state, according to the state wind energy association. Iowa is one of the leading states in wind energy production, getting almost 20 percent of its electricity from wind turbines.
The state’s congressional delegation; governors Terry Branstad, Tom Vilsack and Chet Culver; and the Iowa Legislature have been strong supporters of the Federal Renewable Electricity Production Tax Credit and expanding wind energy production on the state level.
“It’s been one of the few nonpartisan issues in the Iowa Legislature,” Prior said.
The Federal Renewable Electricity Production Tax Credit, part of the Energy Policy Act of 1992 and extended four times, gives wind energy companies a 2.2-cent per kilowatt-hour tax refund for their first 10 years of operation. The American Recovery and Reinvestment Act, known better as the stimulus law, went further in 2009 by allowing producers to take a federal grant that amounts to a 30 percent tax break for the first 10 years after a project is built.
The stimulus law’s impact on Iowa’s wind power industry has been huge. All but $36,000 of the $270.1 million in grants renewable energy projects in the state have received under the act have gone to wind energy projects. The largest beneficiaries of the act were Barton Windpower of Kensett, with $93.4 million; Garden Wind of Zearing, with $83.6 million; and Lost Lakes Wind Farm of Milford at $55.5 million.
The American Wind Energy Association’s most recent report, issued on Oct. 17 and covering data through September 2012, showed Iowa’s 4,536 megawatts ranking third behind Texas and California in the amount of wind energy produced. That’s a slip from its previous No. 2 spot in 2011, although Iowa trails California by just 34 megawatts.
Two turbine production plants, Clipper Windpower LLC in Cedar Rapids and ACCIONA’s in West Branch, have opened where other manufacturers once operated, Prior said.
Still, Clipper Windpower will have eliminated 174 positions nationally by the time its layoffs are completed this fall. An exact number for how many of those were in Cedar Rapids has not been reported.
Baker said ACCIONA has no plans to lay off any of its 100 employees.
But Siemens Manufacturing is to lay off 407 workers in Fort Madison, an IowaWatch review of tax credit-related news stories shows. Siemens received a $3.4 million federal stimulus grant in 2009 to help build its manufacturing plant in Fort Madison.
Sustainable market model
Lisa Linowes, executive director of the Industrial Wind Action Group, would like to let the credit expire because she thinks costs outweigh the benefits of wind energy.
“The wind industry has built itself around the subsidy,” Linowes said. “We should let the market decide what it will produce, and wind producers will have to find a way to lower costs and be more efficient.”
A one-year Production Tax Credit extension would cost taxpayers $12 billion, a Joint Committee on Taxation report says.
Prior conceded that his industry will survive in the long term if the tax credit goes away. He said wind producers will work to expand wind energy’s availability and use smart grid technology, which automates the generation of power.
“One way or another, the wind energy business is here to stay,” Prior said.
Rob Hach, owner and founder of Anemometry Specialists in the northwest Iowa town of Alta, has become an unlikely champion for Obama’s wind energy policy. A lifelong Republican, Hach introduced the president at a campaign stop in Sioux City and attended the Democratic National Convention in August. His company, in business for 10 years and employing 29 workers, performs feasibility studies and installs solar and wind projects.
Hach favors a four-year extension of the federal tax credit, after which, he said, the industry will evolve enough to move toward a lower rate of subsidization.
“The wind energy industry will put a lot of tax dollars into local schools, farmers will have another source of income, and farm kids will be able to stick around and find jobs in the wind industry,” he said.
(This project was produced by Iowa Center for Public Affairs Journalism-IowaWatch.org, a nonprofit, online news website dedicated to collaborating with Iowa news organizations to produce explanatory and investigative work.)