Congress weighs future of wind energy tax credit

Wind energy advocates on Wednesday pleaded with Congress to renew a tax break they credit with sending turbines spinning across the United States, amid opposition from critics who insist the industry no longer needs the help.

The diverse views were delivered during a House Oversight subcommittee hearing on the production tax credit, which allows project owners to reduce their tax bills by 2.3 cents for every kilowatt-hour of electricity they produce over a 10-year period.

Unless Congress renews the 21-year-old production tax credit, the incentive will be limited to renewable energy projects that enter construction before Dec. 31, 2013 (and it still could only be claimed once they start generating and selling power). But President Barack Obama has asked Congress to permanently extend the tax credit at a price tag of $24.7 billion over the next 10 years.

Even though the tax credit has temporarily lapsed at least four times, it has encouraged investment in wind farms, helping to diversify the nation’s energy portfolio and drive down power costs, said Rob Gramlich, senior vice president for policy at the American Wind Energy Association.

“This tax credit . . . drives over $20 billion of private investment annually and brings electricity to 15 million American homes,” Gramlich told the House Energy Policy, Health Care and Entitlements Subcommittee. “Allowing it to expire . . . will move us away from further diversification of our energy portfolio, take away opportunities for consumers to save money, dampen domestic manufacturing and innovation and cause companies to hold off on investing in communities across America.”

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But Robert Michaels, a senior fellow at the Texas Public Policy Foundation, said the wind energy industry no longer needs the help.

The significant growth in wind power — which represented the largest source of new generation capacity last year — proves that it is no longer an infant industry, Michaels said. Renewable power mandates in many states are already ensuring demand for wind power, Michaels added.

“The (production tax credit) has far outlived any limited usefulness that it may once have had in stimulating wind power development,” said Michaels, who was representing the Institute for Energy Research at the hearing. “Utilities in (states with renewable portfolio standards) represent a large and stable market for wind generation that will provide steady demand for it over a long horizon.”

But there’s another option, said Dan Reicher, director of Stanford University’s Steyer-Taylor Center for Energy Policy and Finance.

Reicher said the best option is to slowly phase out the production tax credit for wind energy while giving renewable power projects the opportunity to qualify for master limited partnerships and real estate investment trusts that offer unique financing structures and tax treatment.

Legislation sponsored by Reps. Ted Poe, R-Humble, and Mike Thompson, D-Calif., would give renewable energy projects the chance to qualify for master limited partnerships now mostly limited to endeavors involving depletable natural resources such as oil, gas and coal. Separately, IRS could issue a ruling expanding real estate investment trusts to include renewables.

“I support the extension of the (production tax credit) for a multiyear period as Congress simultaneously transitions the industry to the same financing mechanisms — authorized by Capitol Hill decades ago — that have provided low-cost capital to hundreds of billions of dollars worth of oil, gas, coal and transmission infrastructure for decades,” Reicher told the committee.

A “smart transition” to master limited partnerships and real estate investment trusts would allow wind companies to “land in a place that much of the rest of the energy industry has long enjoyed: low-cost, government-authorized financing mechanisms not requiring periodic Congressional extensions,” he siad.

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Rep. James Lankford, R-Okla., stressed that the production tax credit was never envisioned to be permanent.

“Wind power has been steadily increasing over the past 10 years,” he said, as the hearing got under way. “When does wind power take off on its own?”

Already, Lankford noted, wind represented 3.46 percent of domestic electricity generation last year.

But Rep. Jackie Speier, D-Calif., argued that what’s good for wind should be good for oil and gas too, since some fossil fuel tax credits date back nearly a century.

“Big Oil still gets federal subsidies even though just the five biggest oil companies . . . made a combined $118 billion in profits in 2012,” Speier said. “If anyone has fiscal concerns about federal support for energy producers, . . . there is much more reason to be concerned about support for the fossil fuel industry than wind power.”

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