The wind power industry is caught in the
political whirlwinds. Once again, the sector finds
itself at the vortex of a spin battle between
partisans, although not between all Republicans and
Democrats.
The debate centers on renewal of the production tax
credit that will expire at year’s end unless
Congress renews it. That’s the 2.2 cent per kilowatt
credit given for 10 years to producers. The issue
will take center stage during the presidential
contest, with the incumbent saying that it is needed
to help spawn jobs and to ease reliance on fossil
fuels. The contender, meanwhile, will argue that
such government subsidies have failed and that
un-aided wind and solar power are illusory dreams.
“In place of real energy, Obama has focused on an
imaginary world where government-subsidized
windmills and solar panels could power the economy,”
writes
Mitt Romney, the presumptive Republican nominee,
in his blog. “This vision has failed.”
While the tax credit may very well lapse for a
period of time -- a proposition that does create
uncertainty and chill economic activity -- history
has shown that it will eventually be re-installed.
And with each occurrence, wind energy grows: Nearly
50,000 megawatts of wind power is installed here
with another 8,300 megawatts under construction. All
that is taking place in 31 states and it is
responsible for thousands of jobs.
Wind and solar credits are typically used as chits
while trying to get bigger energy proposals enacted.
In other words, if the breaks given to, say, oil
companies are preserved then certain lawmakers will
bend on the green incentives as well. Despite the
tumult, production costs have dropped 80 percent
over the last 20 years, which the wind industry says
is partly because of a proactive government.
Romney’s political dilemma is that he
needs to win key states that support the wind
industry -- states such as Texas and Iowa where
Republican representation in the U.S. Congress for
those breaks is strong. In fact, such a bill to
extend the production tax credits is now circulating
on Capitol Hill. It has more than 100 co-sponsors, a
fifth of whom are Republicans. It is supported by
key business groups such as the U.S. Chamber of
Congress and National Association of Manufacturers.
“Right now, we can’t contract for long-term power
beyond 2012 because no one knows what is going on,”
says Gabriel Alonso, chief executive of EDP
Renewables, at the
American Wind Energy Association’s annual
meeting.
Re-thinking Policy
The Obama administration’s says that getting the tax
credits re-enacted is one of its top policy goals,
emphasizing that they are essential to helping
fledgling but promising movements. To that end, the
president has said since coming to office that the
green economy will provide the next-generation of
jobs.
The wind sector has installed 35 percent of all new
American electric generation over the past five
years, adds the
American Wind Energy Association. Already, the
industry employs 75,000 people. It could hire
another 25,000 if the wind credit is allowed to live
on. If not, a third of those existing and potential
jobs would be lost, not to mention the billions in
economic activity, the industry adds.
Critics of that thinking, including Romney, are
pointing out that such growth levels are predicated
on government support. They reason that if the clean
technologies were truly competitive then they would
not need any preferences. Free markets, in fact,
dictate that the businesses with the most creative
and marketable ideas will win -- not the ones that
are chosen by government bureaucracies.
Skeptics are also noting that Western European
nations that have given preferential treatment to
their renewable energy sectors are cutting back.
Germany, Italy, Spain and Great Britain are trying
to balance their desires to cut carbon emissions and
promote green energy growth against much tougher
economic times.
To illustrate that point, Romney is expected to
highlight the collapse of the failed solar energy
company, Solyndra, which received $535 million in
federal loan guarantees. “It’s not a symbol of
success but of failure,” Romney says, as reported by
the
Los Angeles Times.
Be careful. The federal incentives work both ways --
and the Democrats have plenty of fire power that
they will also use. Such programs deserve scrutiny
and need to be re-examined, although they should not
fall victim to needless political warfare. As such,
the wind credit is now ensnared in the sniping but
the incentives will -- eventually -- make it out
alive.
EnergyBiz Insider is the Winner of the 2011 Online
Column category awarded by Media Industry News, MIN.
Ken Silverstein has also been named one of the Top
Economics Journalists by Wall Street Economists.
Twitter: @Ken_Silverstein
energybizinsider@energycentral.com
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