WASHINGTON – Wind energy’s most prominent Capitol Hill advocate is renewing his push for the 113th Congress to extend taxpayer subsidies for the renewable energy source.
Sen. Mark Udall, D-Colo., wants Congress to extend a wind-energy tax credit beyond Dec. 31, though he nearly lost his bid to prevent lawmakers from killing off the incentive in the previous session. A one-year extension survived a budget vote on Jan. 1, pleasing the owners of the roughly 2,000 windmills operating in the Coachella Valley.
“Just simply, 30 percent of the value of a project is derived from the tax credit,” said Florian Zerhusen, CEO of WKN USA, a San Diego-based wind developer who flipped the switch on two new 3-megawatt turbines in the San Gorgonio Pass entering the Coachella Valley on Dec. 21, just days before the credit had expired.
“That’s what makes it so important, or you’re making too low a return,” he said.
Udall is dusting off old arguments in favor of the wind production tax credit – which costs more than $10 billion a year – as he pushes for a three- to five-year renewal.
He faces even tougher odds this year because Congress is in a cost-cutting mood. The first phase of $1.2 trillion in spending cuts over 10 years will take effect March 1 unless Congress comes up with a plan to avert them.
The dire fiscal picture doesn’t change the fact that the industry needs more time to mature and stand on its own financial feet, Udall said in a recent interview.
And whatever money Congress spends on helping wind power compete against conventional fossil fuels like oil, gas and coal “is an investment in the future,” he said.
“That’s an investment in American-grown energy, that’s an investment in American manufacturing and, more importantly, that’s an investment in American jobs,” said Udall, who delivered more than 25 speeches on the Senate floor in the previous Congress, urging his colleagues to keep the credit alive.
If Congress decides to overhaul the tax system, it should examine tax benefits for all energy sectors, not just target the wind industry, he said.
“If we’re going to zero out everybody, maybe that’s a fair way to proceed,” Udall said. “But let’s be honest with ourselves. There are many subsidies for many other energy sources and energy technologies. Sometimes it’s … permanent in the tax code, whereas the wind energy production tax credit has always been seen as a temporary incentive.”
The wind tax credit has been in effect on and off since 1992. The current credit of 2.2 cents for every 1,000 watts produced by giant turbines has been in effect continually since 2005.
It was set to expire at the end of last year, but the last-minute deal to avert massive tax increases and spending cuts extended it until Dec. 31, 2013.
Though wind power is clean and doesn’t emit carbon or methane – both of which are linked to global warming – critics say it’s unreliable because it can be produced only when there’s a breeze.
Hydropower, solar, wind and other renewables supplied 13 percent of the nation’s electricity in 2011. Wind alone accounted for 3 percent that year, according to the Energy Information Administration.
Udall wants the current Congress to tweak the tax credit so it’s no longer just for wind producers but would also apply to wind-power distributors and consumers. That would expand the popularity of the tax benefit, which enjoys bipartisan support.
Whatever shape the next wind tax credit takes, Udall will need the help of powerful Republicans like Iowa Sen. Chuck Grassley, a senior Republican on the Senate Finance Committee.
For now, the legislative way forward isn’t clear as Congress is consumed with averting looming, across-the-board spending cuts of about $100 billion from this year’s federal budget.
President Barack Obama expressed support in his Tuesday State of the Union speech for simplifying the U.S. tax code. Experts say a tax reform package could include a reexamination of all incentives, including those for energy.
Udall and other supporters can expect challenges from conservative groups like the Heritage Foundation.
Nick Loris, an energy policy analyst at that think tank, said the wind credit is a particularly egregious example of a subsidy that won’t end. The industry said back in the 1980s that it just needed a little help to stand on its own, but it’s still receiving taxpayer subsidies 30 years later, he said.
“Politicians say these companies only need a three- to five-year window of tax credits and then they’ll be OK, and it’ll help them get through the valley of death. And then three to five years later, we hear them pushing for an extension,” Loris said.
“It creates this dependence on government and it doesn’t help these technologies to realize their true cost of entering the marketplace.”
Fritz Noble, vice president of real estate and development for Wintec Energy, one of the companies that pioneered wind development in the San Gorgonio Pass, thinks the industry ultimately cannot run on the production tax credit alone, but will be propelled by the state renewable energy standards, such as California’s 33 percent goal for 2020.
In the meantime, he predicts a lull in 2013.
“A one-year extension just prolongs the uncertainty,” he said.
The wind industry isn’t focused on congressional politics. Instead, it’s building as many wind farms as possible to take advantage of the one-year extension, according to the American Wind Energy Association (AWEA).
“Billions of dollars of investment sat idled by uncertainty that now can flow into new wind projects and our manufacturing sector,” the group’s interim CEO, Rob Gramlich, said in a statement. “Congress has sent the necessary signal in extending the PTC and many are able to move ahead.”
The domestic wind industry has enough capacity to supply power to 15 million homes across the country, AWEA said. States with large wind farms include California, Colorado and Iowa.
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