The growth of wind power projects could come screeching to a halt if Congress fails to extend the renewable energy Production Tax Credit by the end of the year, according to a new American Wind Energy Association report being released later this week.
While critics oppose the continuation of what they call “wind welfare,” Texas leads the nation in wind power, which makes up about 14 percent of the Texas grid’s generation capacity. Failing to extend the renewable energy tax credit could lead to a dramatic 70 percent to 90 percent drop off in new wind power installation projects, said Rob Gramlich, AWEA senior vice president.
“Wind is the unfortunate poster child for unstable government policy,” Gramlich said, adding that the tax credit’s past and current stops and starts “lead to disruption and layoffs.”
For instance, Dokka Fasteners recently said it is closing its Michigan wind power manufacturing plant largely because of uncertainty on U.S. energy policy and the tax credit, as well as congressional gridlock.
The argument for the tax credit is that wind power is becoming increasingly competitive with traditional coal and natural gas-fired power plants, but that cheap natural gas from U.S. shale and other factors are preventing an equal playing field for now. So the AWAE contends the competitive tax credit is needed until wind is truly equally competitive in the next decade as wind turbine costs keep coming down.
“America has been lulled into complacency during downturns in energy prices before, believing cheap energy would last forever, only to be hit harder each successive time when energy prices inevitably increased,” the report states. “Smart energy policy can help us avoid falling into this trap as we have before by ensuring that America maintains a diverse portfolio of energy options.”
Businesses and investors need “long-term clarity” on credits and public policy in order to make decisions on major wind projects that take years to complete, the report added. The AWEA said wind energy supports 73,000 direct jobs nationwide and enough energy to power 18 million homes. The association also argues the growth of wind power saves lives because of the decreased reliance on fossil fuel power and its carbon emissions.
The Production Tax Credit is competitive and gives a 2.3 cents credit for every kilowatt-hour of electricity sold for the first 10 years of a project’s life. The tax break renewal was estimated to cost $6.4 billion over 10 years. Gramlich added that there are some federal incentives for every type of power generation and that wind is not being singled out. The tax credit still supports wind projects that were already in progress before the end of 2014, but the AWEA report stated that the policy uncertainty will slow the rate of cost reductions in wind power projects.
Still, opponents like the American Energy Alliance argue the AWAE and other groups are guilty of doublespeak for touting the vibrancy of wind power while begging for more government subsidies. The wind industry keeps pushing back the timeline on when it will become truly cost competitive, the alliance adds, so it is time for wind power to stand on its own two feet. Critics also contend wind power is unreliable because wind is intermittent.
Houston-based Calpine, which owns natural gas-fired power plants, opposes the tax credit under the argument that it limits a competitive market.
“Government should not pick winners and losers by subsidizing certain market participants,” Calpine spokesman Brett Kerr said in an email response. “The (tax credit) should not be renewed and market participants should all compete on the same level playing field. Additionally, if the policy goal is carbon reduction, the best approach is to put a price on it and let market sort out most efficient reductions, not having subsidies and set-asides.”
The tax credit is a partisan hot potato that is largely supported by Democrats but has limited GOP backing. The Senate Finance Committee recently approved a bundle of two-year, business tax credit extensions, including the Production Tax Credit, but the full Senate has not yet taken up the legislation. After an August recess, Congress is primarily focusing now on the Iran nuclear deal and government funding legislation.
Gramlich said Congress typically addresses tax credit extensions nearer to the end of the year.
In Texas, the state government requires utility companies to buy a certain amount of their electricity from renewable sources such as wind and solar. An effort to dismantle the state program, called the Renewable Portfolio Standard, failed in the Legislature last spring.