Congress failed to extend generous tax credits to wind power producers this year after conservatives spent months campaigning to let the subsidies die.
In a reversal of fortune, the wind industry was unable to get another extension of the Wind Production Tax Credit, which pays wind producers to generate wind energy for ten years. The credit was heavily opposed by conservative groups and many Republicans who saw it as a 20-year taxpayer handout.
“The wind industry has very little to show after 20 years of preferential tax treatment; it remains woefully dependent on this federal support,” reads a letter signed by 102 conservative groups, led by Americans for Prosperity, to Members of Congress. “Yet despite this consistent under-performance, Congress has repeatedly voted to extend the PTC, usually in 1- or 2-year increments.”
The wind PTC expired on Tuesday night after Congress failed to pass legislation extending the tax credits. However, this does not mean that wind tax subsidies are dead.
The wind PTC has not been extended at least twice in the past, but has eventually resurfaced after lawmakers were able to negotiate an extension. At the end of 2012, wind PTC supporters in Congress were able to attach extending wind subsidies as part of a deal to avoid the “fiscal cliff” of sharp tax increases and spending cuts.
However, this year there was no such deal and Republicans in the House and Senate made efforts to make sure the wind PTC was ended.
“Our nation’s energy policy must make economic sense for taxpayers and not manipulate markets,” wrote a group of 10 senators to the Senate Finance Committee. “Continuation of the wind PTC not only picks winners and losers, it is distorting our energy markets and it’s past time to end a temporary tax credit that was put into law in 1992.”
Later this month, lawmakers could hammer out a deal that would extend the wind tax credits, especially since comprehensive tax reform efforts have not been finalized.
Energy tax reform drafts by Montana Democratic Senator Max Baucus would continue tax credits for renewable energy production, including wind power. Baucus’s plan would give renewable power producers 2.3 cents per kilowatt hour for the first ten years of production – virtually the same as the recently expired wind PTC. The only difference is this tax credit would be given to wind farms that come online before 2017.
“We commend Chairman Baucus and the Senate Finance Committee for putting forward a sound policy option to provide domestic energy producers with stability for the years to come,” Rob Gramlich, senior vice president for public policy at the American Wind Energy Association, said in a statement.
“The tax code has a century-long history of incentivizing American-made energy, and we must continue to ensure that we have plentiful, secure, clean, affordable energy to power our economy,” Gramlich continued. “Wind energy has already proven that it can deliver in these areas and it must continue to be a critical part of the U.S. energy mix.”
According to AWEA, the wind PTC generated $25 billion in private investment in 2012 and supported 80,000 jobs.
However, free market advocates have pointed out that the wind PTC primarily benefits a few states at the expense of many.
“According to our calculations, taxpayers in 30 states and the District of Columbia paid more to the federal government in 2012 to support wind subsidies than wind producers in those states received,” reads a report by the free-market Institute for Energy Research
“Of those 30 net losing states, 11 states and the District of Columbia had no wind production and received zero subsidies but still paid their share of the tax burden related to federal wind subsidies,” according to IER , which opposes extending tax subsidies for wind energy.
According to the Joint Committee on Taxation, the wind PTC is expected to cost $7.7 billion between 2013 and 2017. The Congressional Research Service says the credit will cost $9.7 billion over that time
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