Lapse in federal subsidy for renewable energy project strands wind power
By Jack Coleman, Cape Cod Times, Hyannis, Mass. -- July 6
Jul. 6--The lapse of a crucial federal subsidy has stranded wind power in the doldrums, greatly reducing the amount of electricity coming from newly built turbines.
In 2003, the last year the credit was available, wind power developers posted
near-record numbers with nearly 1,700 megawatts of electricity generated by new
turbines coming on line.
This year, without the credit, that figure is expected to plunge to less than
200 megawatts, and possibly zero, from new turbines coming on line, according to
Jaime Steve, legislative director with the American Wind Energy Association, an
industry trade group.
"Everything is on hold," Steve said. "Everything."
This includes a plan announced last week by the Florida-based FPL Energy to
build what would be the largest wind farm in Oklahoma -- 71 turbines across
3,800 acres, capable of producing electricity for 31,000 homes.
"Construction of the project will begin only after an extension of the
PTC (production tax credit) is approved by Congress and certain other approvals
are obtained," FPL Energy said in a June 28 press release.
Some $2 billion worth of projects are on hold due to the delay, Steve said.
The credit expired in December 2003. If it's renewed, the production tax
credit would be worth $270 million to Cape Wind, the company that wants to build
the 130-turbine wind farm in Nantucket Sound.
Twice before, in 1999 and 2002, the subsidy was extended after expiring. But
this is the longest Congress has gone without doing so.
Proposals to renew the tax credit are included in corporate tax bills
approved in the U.S. House and Senate.
But the bills contain significant differences, which must be reconciled in a
compromise bill, approved by both chambers and signed by President Bush before
the credit would be renewed.
The House bill includes an inflation adjustment and would extend the credit
to Dec. 31, 2005, while the Senate version extends the credit to the end of 2006
and does not adjust for inflation.
House members also want to make other renewable energy technologies eligible
for the credit, while the Senate does not. The Senate wants to extend the credit
to small wind systems that produce less than 75 kilowatts, something the House
bill would not do.
The production tax credit, first included in an energy bill signed by
President George H.W. Bush in 1992, initially provided 1.5 cents for every
kilowatt-hour generated from wind turbines and "closed-loop biomass"
facilities that burn wood chips and organic matter.
The original legislation and both prior extensions included an inflation
adjustment that raised the value of the credit to 1.8 cents per kilowatt-hour by
December 2003. Developers don't qualify for the credit until their projects are
up and running.
If the Senate version of the production tax credit prevails, Cape Wind
Associates could qualify for the credit if the project is built by 2007.
Cape Wind submitted an application for the project to the U.S. Army Corps of
Engineers in late 2001 and awaits a draft environmental impact statement due in
the next few months.
The Corps is the lead permitting agency among 17 federal, state and regional
entities reviewing the $700 million project, the first in U.S. waters if
approved.
But the Cape Wind project has met with stiff resistance from opponents, who
say its benefits are far outweighed by the visual impact of turbines taller than
the Statue of Liberty and detrimental effects on fishing, boaters and tourism.
If built, the 130 turbines within 24-square-miles of Horseshoe Shoal would
provide nearly three-quarters of the electricity used on the Cape and islands,
according to NStar, without fuel costs or pollution.
Cape Wind President Jim Gordon said he's confident Congress will extend the
production tax credit, but acknowledged that building the project would be
difficult without it.
"I think the entire wind industry would face difficulties if the PTC
(production tax credit) is not renewed," Gordon said. "We're part of
that industry."
It's not often that Susan Nickerson, who leads a local group opposed to the
Cape Wind project, agrees with Gordon. But on this, the two frequent adversaries
are in accord.
"We're very much in support of the PTC," said Nickerson, executive
director of the Alliance to Protect Nantucket Sound. "It's the only way
that renewables have any chance to get into the mainstream."
"We've always supported it and we'll continue to support it to make
renewables viable," Nickerson said of the tax credits.
Renewables are hardly the only sector of the energy industry on the receiving
end of tax breaks.
The House version of an energy bill that has languished in Congress even
longer than the production tax credit legislation, calls for doubling tax breaks
to the oil, coal, gas and nuclear industries. The industries could reap $62
billion in tax credits over the next decade under the bill.
Back in January, the Bush administration eased royalty fees by $1.1 billion
for energy companies in the Gulf of Mexico to boost production of natural gas
from offshore rigs.
U.S. Interior Secretary Gale Norton said the plan would save American
consumers $570 million annually in lower energy costs and create 26,000 new
jobs, according to the Reuters news agency.
Cape Wind's foes have criticized the proposed wind farm project as dependent
on government aid, but enthusiasm or disdain for tax breaks and credits depends
on the outlook of the observer, Steve said. "One man's incentive is another
man's subsidy."
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