When Spanish wind developer Gamesa Corp. said Wednesday it would close its western Pennsylvania shop, it didn’t just lay off employees. The maker of wind blades also set off a debate as to the future of the production tax credit given to wind energy.
The credit, at 2.3 cents per kilowatt hour of wind energy generated, has been intended to boost development and jobs in the sector. But the subsidy has fallen under sharp criticism by its opponents, who argue it tilts the playing field and pulls investment dollars in directions they would not otherwise go.
In a letter to the Pennsylvania Department of Labor & Industry, the company said it was required by law to let state officials know of a “pending mass layoff or permanent closure.” The letter, signed by Gamesa’s human resource manager, David Dadoun, went on to say it will shut down its manufacturing facility in Ebensburg effective March 31 “due to changes in Gamesa’s supply chain needs in the North America wind market.”
“This change is being driven by a change in the customer market, which is away from Pennsylvania and the East and to the Southwest, where we see our customer market shifting. Optimizing our supply chain strategy helps us to adjust to a market without a production tax credit,” Frank Fuselier, general counsel for Gamesa, said in a telephone interview.
Those close to the situation, though, say the “change-up” is linked directly to the political realities in Washington, D.C.
“It’s really the uncertainty related to the U.S. market and it is tied to the fits-and-starts in the production tax credit,” said Jim Spencer, chief executive of EverPower Renewables, whose offices are based in Pittsburgh and whose wind farms are located in Johnstown about 90 miles outside of the city.
EverPower employs 53 people and provides 300 megawatts of the wind capacity in the state, which totals 1,334 MW. It sells its output to FirstEnergy and Exelon Corp., as well as the PJM Interconnection.
Spencer said he spoke to Gamesa’s officials this week, when they told him they would eliminate the remaining 62 positions at the Ebensburg facility. He said executives there told him that 2012 had been one of the most productive years the company experienced, largely because the tax credit was in effect and production was booming as a result. However, by 2013 – with all the political squabbling in Washington – the blade-making business suffered.
The Spanish company has spoken before about its frustrations with the continual uncertainty tied to the production tax credit, which expired Dec. 31, but which will remain in effect for 10 years for those projects that got going during that year. In 2009 and 2010, it said it was forced to cut roughly 200 employees at a Cambria Township facility about 60 miles from Pittsburgh.
An even larger question is whether Gamesa’s issues could spread to other wind developers – important, given that Pennsylvania has notable wind energy-related companies located here. The whole jobs versus subsidies issue will continue to be debated by U.S. lawmakers.
According to PennFuture, an environmental organization with offices in Pittsburgh, the state has 24 wind projects that have an installed capacity of 1,334 MW. That’s enough to power more than 389,000 homes, it said. It added the state could host 4,000 MW of wind within 10 years, which would fuel about 1 million homes.
Beyond Gamesa’s blade operations and EverPower’s wind farms, Pennsylvania has a number of blue chip wind companies that include units of NextEra, Duke Energy, AES, E.On, Iberdrola and BP.
As to the future of the production tax credit? It could get retroactively reenacted in a comprehensive energy bill, which has happened in the past. It has been a political bargaining chip among U.S. congressional negotiators.
But EverPower’s Spencer said the wind industry has become much more self-sufficient and the price of wind power and the turbines to generate such electricity have dramatically fallen. Because it is more economical, he says the need for the credit has diminished.
Nevertheless, he said that until the fossil fuels have agreed to end their “subsidies,” the wind energy industry should maintain its tax credit.
“We need to look across the energy spectrum and to focus on the inequalities,” Spencer said. “Everyone in the wind industry recognizes that the credit won’t be permanent and that it could be phased out over a few years.”
|Wind Watch relies entirely
on User Funding