As lawmakers ramp up efforts to kill a key wind energy incentive that expires at the end of the year, the wind industry is concentrating on winning concessions in a potential federal tax-code overhaul.
The wind production tax credit, which expires Dec. 31, pays wind power producers 2.3 cents per kilowatt-hour. It has many boosters on both sides of the aisle, with some of its most vocal supporters being Republicans from breezy Midwest states. But it also has its share of detractors, mainly among fiscal conservatives and Southeast lawmakers.
Sens. Lamar Alexander, R-Tenn., and Joe Manchin, D-W.Va., for example, spearheaded a “dear colleague” letter in November to drum up opposition to the credit, saying it distorts energy markets and sucks too much revenue from the Treasury.
“The growth in wind is driven not by market demand, but by a federal tax subsidy that at times is more valuable than the wholesale price of the electricity in many electricity markets across the United States,” they wrote to Senate Finance Committee Chairman Max Baucus, D-Mont.
Though prices vary by region and energy source, the average electricity price was 10.45 cents per kilowatt-hour in September, according to the Energy Information Administration. Wind power averages around 7 cents.
The American Energy Alliance, the advocacy arm of conservative group the Institute for Energy Research, has started a national advertising campaign to nix the credit. It’s also meeting with House lawmakers on both sides of the aisle to press its case, and it hosted a recent reception that drew 80 Republicans.
“The general mood of the country is on our side. People are looking at ways to trim wasteful spending,” said Benjamin Cole, spokesman with the Institute for Energy Research and the American Energy Alliance.
Much of the criticism revolves around a change that the Congressional Budget Office said will drive the credit’s price tag to $12 billion over 10 years, a move Congress approved in January.
The change allows developers to collect the credit for up to 10 years as long as turbines are in construction or if they have spent 5 percent of total project cost by year’s end and are producing power by 2016. Previously, turbines needed to produce power by the expiration date to earn the credit.
That tweak has given the industry some breathing room – it now has two years beyond the credit’s expiration to get turbines running because those who commit to the “in construction” phase before Dec. 31 will be grandfathered into receiving the 10-year credit.
The industry’s main lobby group, the American Wind Energy Association, says it is focusing on encouraging congressional tax-writing panels to overhaul the federal tax code rather than push for another short-term extension of the 21-year-old credit.
“The industry still lacks certainty in the medium and long term, and that is something Congress needs to address in the next piece of tax legislation. The legislative vehicle could be tax reform, an extenders package, or something else, but this can’t drag out for too long or else disruptions will occur again,” said association Senior Vice President for Public Policy Rob Gramlich.
The wind industry wants more certainty than the boom-and-bust cycle that comes with renewing the credit every one or two years. And it hopes to secure even footing in the tax code with fossil fuel generation, which enjoys several legacy tax provisions.
The wind group says that while the production tax credit can generate a flurry of activity – facing expiration of the credits, the industry in 2012 installed a record 13.1 gigawatts of capacity, enough to power about 3.3 million homes – it leads to lows during periods of uncertainty. The group said just 69.6 megawatts were installed in the first three quarters of the year.
The wind industry adds that the incentive is a crucial driver of manufacturing, helping leverage $25 billion in private investment last year.
“Since the [production tax credit] was extended, business has picked up, many employees have been rehired, and utilities are signing long-term contracts for wind energy,” Gramlich said.
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