Tax credit lapse lets air out of push for wind energy

Tax credit lapse lets air out of push for wind energy

WASHINGTON (AP) - Congress has effectively pulled the plug on the wind energy industry by failing to extend a crucial tax credit, leaving $2 billion worth of projects on hold across the country.

Utilities rely on the tax credit, 1.8 cents per kilowatt-hour, to pick up about one-third of the cost of wind energy they produce.

Wind farms that were built when the tax credit was in place receive the credit for 10 years, so existing operations are not affected by the credit's expiration. But the expiration is holding up new construction.

"The tax credit lapse has brought the industry to a screeching halt," said Mark Haller, owner of Haller Wind Consulting, in River Falls. He said Congress should pass a permanent tax credit, rather than renewing the credit for a few years at a time, as it has several times since 1992.

"We're on this roller coaster," said Haller, who provides consulting services on wind projects.

In Wisconsin, We Energies has contracts with developers to build three wind projects that would provide 214 megawatts worth of power - enough to power about 60,000 homes for a year.

Those projects would quadruple the state's existing wind power capacity, and make Wisconsin the largest wind-generating state east of the Mississippi River, said We Energies' manager of renewable energy strategy, Jeff Anthony.

The company had initially hoped to have those projects up and running by the end of the year, Anthony said, but has pushed them off to next year because of the tax credit lapse.

We Energies currently provides about 1.5 percent of its retail sales through renewable energy (mostly wind); the company has set a goal of increasing that to 5 percent by 2011.

Nationally, wind energy provides about 1 percent of the nation's energy. The American Wind Energy Association hopes to increase the figure to 6 percent by 2020.

"This has cut down development totally. We're dependent on the production tax credit," said Wayne Brunetti, chairman and CEO of Minneapolis-based Xcel Energy, which is second in the nation in wind energy acquisition.

Xcel relies on expanding wind energy to reduce carbon dioxide emissions. It plans to triple its level of wind-powered energy in the next eight years, but needs the tax credit to make that work.

The utility has operations in 11 Midwestern and Western states, including Texas, which is second in the nation in wind production, and Minnesota, which is third.

Legislation to renew the wind energy production tax credit for three years was included in last year's mammoth energy bill, but that bill failed to get through Congress, leaving the tax credit to expire on Dec. 31.

"Without the extension of this important tax credit, we risk losing thousands of jobs this year alone and will put new wind energy production and nearly $2 billion in economic activity on hold," said Sen. Norm Coleman, a Minnesota Republican who has worked with senators from both parties to get the tax credit renewed.

The American Wind Energy Association says its members have laid off 2,000 members this year.

The group had set a goal of 2,000 megawatts of new wind energy this year (enough to power 600,000 homes a year), up from 1,700 last year.

Now, the group says the number will be between 400 megawatts and 1,000 megawatts.

"And if Congress doesn't extend the production tax credit by the August recess, it looks like this year is a wash," said association spokeswoman Kathy Belyeu.