Expiring tax credit curtails renewable development

Dec 07 - The Brownsville Herald

 

Wind power projects around the country are grinding to a halt due to uncertainty over the future of the production tax credit for such projects.

The PTC, which basically gives wind farm owners a tax break for producing electricity, is scheduled to expire at the end of the year. To take advantage of the credit, wind farms must be operational by the end of the year. This has caused a flurry of activity to finish projects that are near completion, though future projects have stalled.

It's happening as well in Texas, which is sinking billions of dollars into transmission lines to carry power from West Texas wind farms to far flung cities. In terms of wind production projects closer to home, there's both skepticism and optimism, depending on which renewable energy company spokesman you talk to.

Tammie McGee is communications manager for North Carolina-based Duke Energy Renewables, which has developed two wind farms, Los Vientos I and II, which straddle Cameron and Willacy counties. Turbines are up and spinning at both sites and should be in commercial operation by the end of the year, she said, noting that a ribbon-cutting is planned for Jan. 26.

But with the PTC's expiration just weeks away and no certainty that it will be renewed, Duke isn't planning any new wind projects in Texas in the immediate future and instead will focus on solar.

"Texas is pretty unique in that it has great resources for both wind or solar," McGee said. "Ordinarily a state has the potential for one and not the other. I would see us pursuing solar in Texas in the coming year or two."

A lot of manufacturers of wind towers and turbines have shut down production and laid off employees, she said. The industry in general has slowed down because the PTC has so far not been extended, caught up in difficult "fiscal cliff" negotiations in Washington. Even if the PTC is extended through 2013, it'll take time for manufacturing to ramp up again, McGee said.

"We don't foresee the megawatts coming online in 2013 that they did in 2012," she said. "A more long-term energy policy is needed. This has been happening for years, where the PTC expires then it's on again, so you have this great fluctuation in the wind industry. I think we'd all be better served with a long-term energy policy that maybe steps it down over a number of years, because as time goes by the cost goes down for renewable energy."

McGee declined to speculate on the chances of getting such an energy policy, saying it's too early to know.

"I would just be speculating in Washington politics at any rate," she said.

The PTC, first introduced in 1992, has been losing support from many of the conservatives who once supported it, including Gov. Rick Perry, who championed state legislation in 2005 to spend nearly $7 billion on transmission lines and supported Texas' renewable energy mandate. Mitt Romney campaigned against green energy incentives during his failed presidential run, while subsidies for alternative energy in general have become a favorite target of tea party conservatives.

Still, Matt Tulis, spokesman for Chicago-based E.ON Climate & Renewables North America, which threw the switch on its Magic Valley Wind Farm project in Willacy County in August, said his company hasn't pulled the plug on solar despite doubts over the PTC. At the same time, 2013 contains unknowns for wind power, Tulis said.

"We're still trying to find some good sites," he said. "The coastal sites perform well. There are still opportunities down there. There's still availability on the transmission system, which is one of the things that we look for.

"From what we're hearing, we're optimistic that it will get extended, because we've seen good bipartisan support in the Congress for that extension," Tulis said. "It makes it a little tricky on the timing for future projects because a there's certain amount of lead time that you need to get the equipment in place and the construction crews in place and that sort of thing, so there's a lot of uncertainty around what's going to happen in 2013."

E.ON has other wind projects in development, he added, though the timing is going to be tricky until the PTC question is settled.

"It depends on how and when it's extended," Tulis said. "The last time it was for a period of two or three years. "It just depends on how the law is written and how it's extended. We've seen this situation before. In the years that the tax credit has been in effect, you've seen a lot of development all across the country. And when the tax credit isn't there it falls off. It's been sort of up and down."

The PTC is an incentive to invest, particularly in rural areas that don't see much investment, he said.

"Sometimes the wind farms allow the community to come back a little bit," Tulis said. "It represents a pretty large investment in those areas. We'd definitely like to develop more, but we just have to take a look at it and see -- work out the timing and when we're going to move forward."

As for Austin-based Baryonyx Corporation's exploration of offshore wind farm development in the Rio Grande Valley and elsewhere along the coast, the company's plans don't depend on the PTC, said Baryonyx CEO Ian Hatton in an email.

"We do not include it in economic analysis," he said. "We have always assumed that it would be reduced or removed in time and the projects should therefore not assume it is available."

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(c)2012 The Brownsville Herald (Brownsville, Texas)

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