Federal wind energy credit could expire

Jul 31 - McClatchy-Tribune Regional News - Scott Kraus The Morning Call, Allentown, Pa.

Windkits CEO Eric Schwartz has been watching the political maneuvering over extending a 20-year-old tax credit for wind energy producers, and he doesn't like what he's seeing.

The credit, caught in the gridlock that has paralyzed Congress this election year, helps drive investment in wind turbines, Schwartz said. His company employs 20 people making a component of windmill blades and moved to Upper Macungie Township in March 2011.

With the credit's future in doubt, major windmill manufacturers have slowed production or even put projects on hold awaiting the outcome, he said. With the dog days of August approaching, building and installing a windmill by the end of the year is dicey.

"The problem is you have to be connected to the grid by the end of this year to take advantage of the credit," Schwartz said.

In Forks Township, John Kovacs, president of hydraulic toolmaker TorcUp, with about 25 local employees, has seen a similar slowdown in orders from wind turbine installers.

"If the tax credit doesn't go through, they don't build them and they aren't using our wrenches to erect the windmills," said Kovacs, whose business also provides hydraulic tools to the coal, oil and gas industries.

Two of Kovacs' top wind industry customers -- Gamesa, which has a plant in Bucks County and Vestas, which has three facilities in Colorado -- recently announced layoffs.

Wind industry leaders hope the 2.2 cent-per-kilowatt-hour tax credit will be extended this fall or after the election. Overall, U.S. taxpayers spent $1.4 billion on renewable energy tax credits in 2011, according to the Congressional Budget Office.

The wind credit has bipartisan support -- especially in states with significant wind energy employment -- including that of Republican Lehigh Valley Congressman Charlie Dent.

But unlike past years when the credit was in doubt, there's much less certainty a resolution will eventually be reached this time, said Aaron Severn of the American Wind Energy Association.

"In the past there was more of a calculation by the majority of the developers that it would get extended," Severn said. "There were more of them willing to make that bet and move forward with their projects. The shift in political tone, the increasing gridlock, the harsher rhetoric against incentive for renewable energy, has really had an impact."

On a top-10 list loaded with political swing states, Pennsylvania ranks eighth in the nation in wind energy jobs, with between 3,000 and 4,000 workers employed manufacturing or installing windmills, according to the American Wind Energy Association's "U.S. Wind Industry Annual Market Report Year Ending 2011."

President Barack Obama and Republican presidential candidate Mitt Romney are split on the credit. Obama supports it, Romney opposes it.

The Obama campaign has been pressing the issue in recent days, focusing on politically critical states that are among the leaders in wind energy jobs, including Ohio, Colorado and Iowa, all considered up for grabs in 2012.

"It is ironic Mitt Romney's campaign is talking about small business while his policies on the wind energy production tax credit would lead to job losses," former energy Secretary Frederico Pena said on a conference call with reporters Monday.

The Romney campaign made a firm statement against extending the credit on Monday, saying Obama's economic policies have done little to help any American workers, including those in the wind industry, and have resulted in wasted money on questionable green energy projects.

"Mitt Romney believes it is a time for a new approach to ensure our nation's energy independence," said Kate Meriwether, the campaign's Pennsylvania spokeswoman. "He will allow the wind credit to expire, end the stimulus boondoggles, and create a level playing field on which all sources of energy can compete on their merits."

It's a perspective shared by Ken Green, an environmental and energy policy expert at the conservative American Enterprise Institute inWashington, D.C.

If government wants to subsidize energy development, Green said, it should provide an equal subsidy to all forms of energy.

"In the absence of an effort to level those, I think it's generally a bad idea for the government to be picking winning and losing technologies," he said. "There is an argument to be made that what is propping up wind is a bunch of unnatural market subsidies."

The American Wind Energy Association says the credit allows wind energy developers to obtain financing to build new windmills. With the credit in place, wind made up 35 percent of the additional energy capacity added in the U.S. in the last five years, accounting for $15 billion in private investment.

Wind now supplies 2.9 percent of the country's energy, and the credit would help the U.S. keep pace with China, which has been aggressively investing in alternative energy, according to the association.

But supporters have been unable to get a vote on the credit on its own, and the issue is now caught up in the overall debate over income tax rates set to expire at the end of the year. In March the Senate defeated a measure to extend it and other energy production tax breaks.

U.S. Sen. Bob Casey, D-Pa., voted for the amendment. U.S. Sen. Pat Toomey, R-Pa., voted against it.

"[Toomey] supports comprehensive tax reforms that would largely rid our tax code of complex credits and loopholes while lowering rates across the board for every American," spokeswoman Rebecca Neal said.

The credit last expired in 2004, only to be reauthorized retroactively in October of that year. The result in that year was a 77 percent decline in wind installations, according to the American Wind Energy Association.

Windkits' Schwartz, who started his business in 2003, is hoping to avoid a repeat.

"It would be crazy," he said.

scott.kraus@mcall.com

610-820-6745

Both Sides Now

For extending the wind energy tax credit:

Would help the U.S. continue to increase its production of wind energy and manufacturing, creating jobs and producing clean energy.

Against extending the wind energy tax credit:

Such credits are costly and distort the market by propping up unprofitable forms of energy, which should compete on a level playing field.