Obama, Romney disagree over tax break for wind energy

WASHINGTON -- Oct 31 - McClatchy Washington Bureau

The wind energy industry is at a crossroads, rapidly shedding jobs and preparing for bigger layoffs if Republican presidential contender Mitt Romney gets his way and a billion-dollar tax break for the industry is allowed to expire.

It's become a contentious issue in the campaign, and it's at the center of the battle between President Barack Obama and Romney over federal investment in renewable energy at a time of government budget deficits. The stakes are heightened by the fact that crucial swing states in the election are among the nation's leaders in wind power jobs.

Navigant Consulting, in a study for the American Wind Energy Association, estimated that the loss of the tax credit could cost 37,000 jobs throughout the wind energy-supply chain in the United States. That's nearly half the jobs in the industry.

Layoffs already have begun. Wind turbine giant Siemens announced in September that it was eliminating 600 positions in Iowa, Kansas and Florida. Vestas Wind Systems reduced its Colorado workforce by 500 positions this month and is closing a research facility in Texas. Wind tower maker Katana Summit said in September that it would lay off nearly 300 people and close plants in Washington state and Nebraska. Molded Fiber Glass, which makes wind turbine blades, is laying off 92 people in South Dakota. Those are just some of the bigger examples recently announced.

"Most of the major manufacturers have announced layoffs throughout the wind industry," said Amy Grace, a wind analyst at Bloomberg New Energy Finance.

She said the bulk of the layoffs were a result of uncertainty over whether Congress will let the tax credit expire Dec. 31. Obama argues it should be extended but Romney wants the tax credit to die at the end of the year. While the decision will be up to Congress, Romney is having a lot of influence as standard bearer for the Republican Party.

Eighty-one percent of installed wind-power capacity is in Republican congressional districts, according to the trade industry group American Wind Energy Association, and the tax break has been renewed with bipartisan support since 1992. But it's run into serious trouble this year, with opposition from Romney and tea party backers.

"It is time for wind to grow up and compete on its own, instead of expecting to get paid by taxpayers to do its job," argues the Alliance for Wise Energy Decisions, a group of conservative activists against the tax credit.

The credit allows wind power producers to reduce their tax payments by 2.2 cents for each kilowatt-hour of electricity they produce for the first 10 years of a project, a benefit that can cut costs by as much as a third.

There's fierce debate over the tax break even within the top wind industry states. Texas Republican Gov. Rick Perry opposes extending the credit, even as his state leads the nations in wind installations. Kansas Republican U.S. Rep. Mike Pompeo recently called the credit an "enormous government handout" that amounts to rigging the energy market as a corporate favor to the wind industry. But Kansas Republican Gov. Sam Brownback and the state's Republican U.S. senators, Pat Roberts and Jerry Moran, are supporting the tax credit.

"The jobs of thousands of Americans would come to a halt," said Kimberly Svaty, who represents Kansas in the Wind Coalition, a national nonprofit advocacy group. "You would lose billions of dollars of investment in new wind generation. The investment and jobs would flow to China, which is ramping up investment in the wind industry."

The presidential candidates also have debated the tax breaks for oil companies, which are worth more than $2 billion a year.

Obama calls for ending the oil tax breaks, arguing that the companies don't need them. Romney indicated that he could be open to eliminating oil tax breaks in return for a lower overall corporate tax rate.

Obama has hammered Romney over his opposition to extending the tax credit. At their second debate, the president charged Romney with dismissing employment in the wind industry as nothing but "imaginary jobs."

"You've got thousands of people right now in Iowa, right now in Colorado, who are working, creating wind power with good-paying manufacturing jobs, and the Republican senator in Iowa is all for it, providing tax breaks to help this work, and Governor Romney says, 'I'm opposed. I'd get rid of it,' " the president said.

Romney objected to the characterization, although he didn't defend his opposition to the wind-industry tax break.

"I don't have a policy of stopping wind jobs in Iowa. They're not phantom jobs. They're real jobs," he said. "I appreciate wind jobs in Iowa and across our country."

Obama's "imaginary jobs" jab came from a March opinion piece from Romney in The Columbus Dispatch of Ohio. It said that "in place of real energy, Obama has focused on an imaginary world where government-subsidized windmills and solar panels could power the economy."

Romney spokeswoman Andrea Saul questioned the effectiveness of the tax break in response to questions from McClatchy Newspapers.

"Governor Romney believes the right path forward for the industry is to implement competitive tax and regulatory policies that create a level playing field and allow the best technologies to compete and thrive," she said.

The American Wind Energy Association has spent $1.1 million on lobbying this year as it attempts to keep the tax credit.

"I think most people agree this is not a time to destabilize a growing and vibrant part of our economy and that's what the wind industry represents," said Tom Carnahan, the chairman of the association and the chief executive officer of Wind Rose Energy, a renewable energy investment fund that's based in New York.

Wind employment peaked in 2009, and the industry has challenges other than politics. Even if the tax credit is renewed, analysts expect a slowdown. There's the low price of natural gas, which competes with wind in some markets. Other issues are low energy demand caused by the weak economy and the amount of existing wind capacity.

"There was a lot of hype two to three years ago and an overbuild in some of the manufacturing capacity. We're starting to see that even out," said Matt Kaplan, a senior analyst at IHS Emerging Energy Research in Cambridge, Mass.

Wind energy in the United States has grown by more than 18 times since 2000, although it still accounts for just 4 percent of total U.S. electrical-generation capacity. This year is expected to be the biggest ever for the industry, as companies move projects up a year to try to complete them before the Dec. 31 tax credit expiration date.

But even as projects are moved up, the layoffs are happening because of the lack of orders for next year.

"If the tax credit isn't renewed, we'll certainly see a lot of companies go into hibernation and there will be attrition both along the supply chain and amongst some of the developers," said Kaplan, a specialist in wind energy markets.

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