By Jeffrey Ryser on March 7, 2010 5:22 PM

Some of the incentives to the renewable electricity business are getting tangled up, apparently confusing even some US senators.

Congress passed the so-called stimulus bill more than a year ago, festooning it with hundreds of stimulating items -- dozens of separate buckets of loan guarantees, tax breaks and even cash grants that are dedicated to activities ranging from the smart grid to nuclear power plants, from solar panel manufacturing facilities to home weatherization.

But one area has been drawing somewhat confused attention of late from some senators who even voted for the stimulus package a year ago February: two items directed at the wind energy installation business.

One item, referred to as Treasury 1603 funds, is cash that has been going directly to the wind farm developers who have brought wind farms online since January 1, 2009. The cash, equal to 30% of construction costs, acted as a carrot to keep these companies building wind farms in the US.

The incentive seems to have worked. Developers bought enough turbines in 2009 to install a record 10,000 MW of wind capacity, compared with 8,500 MW in 2008, which was itself a record amount.

Some of the developers were US affiliates of foreign companies, while others were US-based. Some of the turbines were manufactured in the US and some were imported. Some of the turbines manufactured in the US were manufactured by US companies, some by US affiliates of foreign companies.

Good to its word, Treasury over the past six months has paid out $2.1 billion to 10 US-based and seven foreign-based US wind farm developers for bringing into service 37 wind farms in 17 states with combined capacity of just over 4,000 MW.

That is the installation side of the business. The second stimulus item is a tax break, known as 48(c), which goes to companies that would set up turbine manufacturing facilities in the US to supply the US market.

Since 2007 a host of US-based, European and Asian-based manufacturers have already set up manufacturing in the US to supply the US market. The added manufacturing capacity was pulled in as the wind installation business in the US took off in 2007 and 2008.

But the 2008 financial crisis hit turbine demand hard, and 48(c) was aimed at reviving it. Today, a year later, turbine manufacturing capacity in the US is in slight overcapacity.

One senator, Ron Wyden of Oregon, wants the 48(c) credits redirected now to US manufacturers dedicated to exporting wind equipment. US and Chinese Export-Import Banks have already begun financing big foreign purchases of their home-grown equipment.

Tackling the 1603 part of the picture, though, last week four other senators, led by Charles Schumer of New York and Bob Casey of Pennsylvania, said they didn't want Cielo, which is developing a big Texas wind farm, to get stimulus funds to buy turbines manufactured in China. They said US stimulus money should not stimulate Chinese jobs.

Presumably they would prefer Cielo to buy from one of the three biggest suppliers to the US market: GE, or Germany's Siemens or Denmark's Vestas, all of whom have US-based manufacturing.

But what should one make of the fact that the deal with the Chinese was arranged in the first place by the US Trade Representative, Ron Kirk, who, in a quid pro quo arrangement last fall, agreed to have the Chinese sell into the US market in exchange for US companies' selling into the Chinese market, which has been expanding at the same annual rate as the US's.

While the terms of the deal are still a bit murky, the announcement of the Cielo joint venture with China's Shenyang Power Group included the information that Chinese banks were going to finance the estimated $1.5 billion project. The strong suggestion is that the Chinese government is a big investor. The wind business, in its relatively short life, has always been global, and it is only becoming more so.