WASHINGTON – Businesses working to launch the first offshore wind energy facilities in U.S. waters urged Congress on Monday to renew tax credits they said are “absolutely critical” to kick-starting an industry that could bring significant numbers of jobs to Maine and other coastal states.
The prototype floating wind turbine launched off the coast of Castine by the University of Maine and Cianbro Corp. last June represented the first offshore wind turbine deployed in U.S. waters. By comparison, roughly 2,000 wind turbines now spin in European waters, including 400 installed last year.
Doug Pfeister, president of the Offshore Wind Development Coalition, called the scaled-down UMaine turbine “a great first step.”
“But we are trying to do a lot more. We want to catch up with Europe,” said Pfeister, whose organization is a trade group representing wind power companies and contractors.
As part of that effort, representatives from Cianbro and two companies attempting to build offshore wind facilities in New England waters held an event on Capitol Hill to push for renewal of two wind power tax credits that expired at the end of last year.
“The global energy industry people are asking the question, ‘Where are the Americans?’” said Dennis Duffy, vice president of Energy Management Inc., the company hoping to build a 130-turbine wind farm off the coast of Cape Cod.
“It is really booming in other nations because of the predictability and the stability that it takes to get these projects off of the ground,” Duffy said. “If it takes six to eight years to get a project going, investors need to be confident when they start investing today that when they are done (building), the credits and supports and incentives will still be there.”
The two types of tax credits in question offer tax breaks on either the production of energy or investments in a project. While supporters insist the programs create jobs and support domestic production of “green energy,” critics contend the subsidies prop up an industry that would struggle to compete otherwise.
CIANBRO AND JOB CREATION
Cianbro was held up Monday as an example of the job-creation potential within the offshore wind industry.
Cianbro was hired to design and build the offshore substation – called the “electrical service platform,” or ESP – for the Cape Wind project. Valued at roughly $100 million, the platform project would create or support up to 350 construction-related jobs at Cianbro’s manufacturing facility on the banks of the Penobscot River in Brewer.
Construction of the more than 3,000-ton platform would take roughly 22 months, after which the two massive sections would be shipped downriver by barge for additional assembly on land and offshore in Massachusetts.
“It really creates jobs right here at home,” Joe Cote, vice president and general manager at Cianbro’s Brewer facility, said during the briefing. Cote said the offshore wind industry is still in its infancy in the U.S. and that the tax credits are necessary to provide confidence to investors.
“It’s building an industry right now – that’s what we are talking about,” Cote said.
The Obama administration has made development of offshore wind energy a high priority and recently auctioned off leases for two East Coast projects located in federal waters off the coasts of Virginia and Rhode Island/Massachusetts. The U.S. Department of the Interior is planning additional offshore wind lease auctions.
Cape Wind is the most fully developed of several offshore wind projects under development along the East Coast. Company officials have secured power-purchase agreements and hope to begin construction on the 130-turbine wind farm this year, although opponents continue to challenge the project in court.
Meanwhile, the University of Maine-led DeepCwind consortium, which launched the floating turbine near Castine last summer, is competing for federal grants to prove its deep-water turbine technology is feasible. Although offering some of the nation’s best wind resources, the Gulf of Maine has deep waters and harsh conditions that would require different types of turbines than those planned for the Cape Wind and other East Coast projects.
The fight over tax credits is not a new one for the U.S. wind power industry, although Monday’s focus on offshore wind suggests that proponents of the tax programs are broadening their campaign.
In recent years, Congress has reauthorized the two wind power tax credit programs and roughly 50 other individual tax break programs – collectively dubbed the “tax extenders” – for a year or two at a time. That means supporters of the programs must return to Congress every year to plead their cases.
This year, the debate among congressional leaders on the powerful tax-writing committees is whether to consider those tax extenders independently or as part of a larger tax reform initiative. But the prospects of a major tax reform bill emerging from Congress during an election year appear dim, especially after the chairman of the Senate Finance Committee, Montana Democrat Max Baucus, resigned this month to become the new U.S. ambassador to China.
Earlier this month, Baucus’ Democratic successor as Senate Finance Committee chairman, Sen. Ron Wyden of Oregon, said he hoped to deal with the tax extenders in the near future.
“These are important measures, like research and development, renewable energy,” Wyden told Bloomberg Television. “They expired at the end of last year. My hope is that we can get them re-enacted promptly so we don’t sacrifice … important investments, for example, that encourage innovation and then use them as a bridge to more comprehensive reform.”
One alternate option supported by those gathered on Monday is a bill co-sponsored by Sen. Susan Collins, R-Maine, and Sen. Tom Carper, D-Del., that would create a 30 percent tax credit on investments in offshore wind projects. A companion bill co-sponsored by a Democrat and a Republican was also introduced in the House.
The Treasury Department, working in concert with the Department of Energy and Department of the Interior, would make the final decision about which companies would receive the credit. Those companies would then have five years to build the wind energy facility. The tax credit would be available for the first 3,000 megawatts of offshore wind in the U.S. By comparison, all of the offshore wind turbines operating in the European Union can produce a maximum of 6,000 megawatts.
Stephen Reinstein, senior legal counsel for the power industry construction and services firm Alstom Power, said predictable tax policies are key to spurring the commercial-scale offshore wind projects needed to build a viable industry in the U.S.
“Clearly, we don’t want to build these things one or two at a time,” Reinstein said. “We need to build them in volume, and to do that we need to have good policies in place. And you need stability in those policies.”