December 28, 2013

Texas wind industry might face a future without incentives

By Bill Hanna | Star-Telegram | Dec. 28, 2013 |

The turbines that generate wind power across Texas won’t stop spinning anytime soon.

But the industry, which has grown rapidly over the past decade, might be near a crossroads.

The federal production tax credit, which gives wind farm owners 2.3 cents for every kilowatt-hour of power they produce for 10 years, has helped propel the industry in Texas and elsewhere across the United States.

But it is set to expire Tuesday.

Critics contend that it is a subsidy that costs taxpayers billions.

But without the tax credit, there is a very real question of whether the wind industry will keep going in the United States or shift to other countries.

For the next several years, the loss of the tax credit won’t be noticeable because projects that begin construction by the end of 2013 have another 18 to 24 months to be completed and still qualify for the incentive.

But Walt Hornaday, president of Austin-based Cielo Wind Energy, is already making plans for the tax credit’s disappearance.

“Once this deadline passes in December, it definitely puts uncertainty on future projects,” he said. “Instead of laying folks off and contracting our spending, we’re simply moving to other markets.

“Canada, Mexico and South America are pretty busy right now. Pretty much everything except for Europe is open to more wind energy right now.”

Hornaday remains optimistic that the production tax credit will eventually be renewed, despite those who oppose it in Washington.

“I’m bullish something will eventually get done,” he said.

When the tax credit was extended earlier this year, all it required was for construction of wind farms to start by the end of 2013. Projects didn’t have to be completed until 2015.

But Rob Gramlich, senior vice president of public policy for the American Wind Energy Association, acknowledges that another slowdown is likely if the tax credit disappears for good.

“Our industry still faces uncertainty in the medium and long term and needs Congress to address that next year,” he said “The legislative vehicle could be tax reform, an extenders package or something else, but, ultimately, our industry will begin to feel the impacts of uncertainty in 2014.”

For Texas, the rapid growth for wind appears unlikely to end in the next year or two. Both Google and Microsoft have committed to buying power from Texas wind farms.

In its November report, the Electric Reliability Council of Texas, or ERCOT, which manages the grid for most of Texas, said it is tracking interconnection requests for another 22,600 megawatts of wind generation.

Texas had 10,970 megawatts of wind power installed as of Nov. 30, according to an ERCOT report.

A U.S. Energy Information Report said Texas continues to outpace the nation in wind energy.

“Texas became the country’s largest wind energy producer in 2006, when it surpassed California. In 2007, it became the first state to install one gigawatt of wind capacity in a single year,” the report says. “Substantial new wind generation capacity is under construction. Texas has seven of the 10 largest wind farms in the nation, including four of the top five.”

In addition to questions about incentives, the Texas Coalition for Affordable Power said in a 2012 study that wind doesn’t always blow when it is needed most in Texas.

“Official figures show that wind comprises nearly 12 percent of the overall generation capacity in Texas, but wind generators provide just 1.1 percent of available capacity during summer peaks,” the report said. “ This makes wind power, at peak, much less dependable than energy from natural gas-fired plants, coal plants, nuclear plants or even biomass.”

Sweetwater Mayor Greg Wortham, who also heads the Texas Wind Energy Clearinghouse, said that wind energy’s efficiency is improving and that incentives should be on a level playing field with other forms of energy.

The Sweetwater area is benefiting not only from wind energy but also from the oil and gas boom taking place across West Texas.

“I think you match wind incentives up with all other forms of energy incentives,” Wortham said. “It still makes sense to have wind incentives, but that doesn’t mean I believe Congress will just jump in and do it.”

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