With the 2012 coming to a close and 2013 about to
emerge, Washington is full of prognosticators. In
the energy world, questions abound. But perhaps none
have generated as much controversy as the production
tax credit given to wind, which expires at year-end.
It all centers on the tax credit awarded to
renewable energy producers worth 2.2 cent per
kilowatt hour. The one for solar does not expire for
another four years. But the one for wind is about to
die unless Congress resets it. Supporters say that
it is essential to help build out clean generation
and that once it gains a foothold, it would no
longer need that type of assistance. Such proponents
credit it with preserving 75,000 jobs. Critics, on
the other hand, says that it distorts energy markets
and that such handouts are excessive.
But with the nation about to fall over the “fiscal
cliff,” U.S. lawmakers may strike a deal that would
not only avert rising middle class taxes but also
one that would keep this wind tax credit going for
another year. During that same time period, Congress
has given all indications that it would revisit the
entire U.S. tax code in an effort to reduce tax
rates for individuals and businesses in exchange for
wiping out loopholes and favors given to all
taxpayers.
In an interview with Iowa reporters via a conference
call and one that was printed up the
RadioIowaNews website, Republican Senator Chuck
Grassley said that the wind tax credit would go
through before the year-end deadline. He said it
would be tossed into the mix with other such breaks
-- favors that have not gotten nearly the amount of
attention as the one provided to wind.
What makes Grassley’s position “unusual,” is that he
is breaking from his official party line. That’s not
really a surprise as Iowa’s economy has a strong
link to the wind community that provides hundreds of
direct jobs there. During the presidential election,
President Obama came out strongly in favor of such a
continuance while his opponent took the opposite
view.
“I believe when we break the ice and there’s a
framework put together ... then that gives the other
committees of Congress an opportunity to operate,”
says Grassley, as reported by RadioIowa. “I think
that you’d find unemployment (compensation) and the
wind energy tax credit and 59 other tax incentives
that are expiring at the end of this year just kind
thrown into that package.”
Not So Fast
Grassley’s predictions may be a hopeful sign to the
wind industry. But it is still getting met with an
equal and opposite reaction from the other side -- a
foe that still puzzles the wind sector: Exelon Corp.
Ironically, the company used to sit on the board of
the American Wind Energy Association and its
corporate headquarters reside in Chicago, which is
President Obama’s hometown.
Exelon’s Chief Executive Christopher Crane is in
Washington this week to meet with U.S. lawmakers.
His goal: to end the production tax credit for wind
only. The
National Journal is reporting that Exelon’s
participation in this debate appears to have
silenced the Edison Electric Institute, which had
signed a letter endorsing the wind tax credit about
a year earlier.
“I think Chris has his priorities in exactly the
right place,” says John Rowe, who is Exelon’s former
chief executive in reference to the current leader
there, Christopher Crane. His interview was given to
the National Journal’s Amy Harder. The company
continues to say in public forums that the tax
credit is distorting competitive wholesale energy
markets and it is causing financial harm to other,
more reliable energy sources.
Exelon is principled. But it is also looking out for
its shareholders. In other words, it has 900
megawatts of wind that operates in 10 states, but it
has about 32,500 megawatts of nuclear generation. As
such, it has fought hard not just for nuclear loan
guarantees but also for tougher clean air standards
that give it a leg up over those utilities that rely
on coal.
At the same time, it is saying that wind’s
production tax credit (PTC) has outlived its
usefulness. But it is predicting that wind power
generation would continue its growth trend upward
even without favorable tax treatment.
Odds are that Senator Grassley will get this one
right. Exelon’s efforts, however, won’t be in vain.
That’s because of the bipartisan support to minimize
all tax breaks in exchange for lower tax rates. But
that’s a monumental task that has not been tried
since 1986. In the event those lawmakers fall short,
the production tax credit will remain a chit to be
exchanged during negotiations.
EnergyBiz Insider has been awarded the Gold for
Original Web Commentary presented by the American
Society of Business Press Editors. The column is
also the Winner of the 2011 Online Column category
awarded by Media Industry News, MIN. Ken Silverstein
has been honored as one of MIN’s Most Intriguing
People in Media.
Twitter: @Ken_Silverstein
energybizinsider@energycentral.com
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