Ken Silverstein | Dec 02, 2013

The wind energy’s production tax credit is likely to just blow past its year-end deadline without getting extended. Efforts are underway to continue the credit but those are being met by forces from competing energy forms, which say that the subsidy has already cost taxpayers $12 billion over 20 years.

The tax credit, which has grown from 1.5 cents per kilowatt hour of energy produced when it first started in 1993 to 2.3 cents for the same unit today, will expire on December 31, 2013. But that does not end the debate: For starters, when Congress prolonged it in early January as part of the “fiscal cliff” negotiations, it said that any good-faith project announced this year would have until 2014 to get underway, enabling the credit to last until 2024 for those deals.

Secondly, while it would appear that the credit will be allowed to lapse on December 31, the country has witnessed this event four other times since the year 2000. The subsidy, eventually, gets traded among congressional negotiators who allow that provision to go through in exchange for something that they may want through so-called “tax extenders."

The companies and groups that have been most boisterous about the tax credit are, respectively, Exelon Corp. that is dependent on nuclear energy as well as the American Energy Alliance that is comprised of fossil fuel developers. While the wind companies, represented by the American Wind Energy Association, do not bash other fuel forms, their supporters often do. As such, they and their representatives in Congress have opposed such fossil-backed programs as the Keystone XL Pipeline, and perhaps future coal plant construction. 

Nevertheless, bipartisan congressional efforts are taking place now to keep the wind tax credit going. That’s because such development is occurring across the country and in those states that have Republican representation at both the state and federal levels. 



With that, the American Energy Alliance has written U.S. lawmakers and noted that wind is now “mature” and has at least 60,000 megawatts of electric generation. It references the U.S. Department of Energy, which says that wind power made up 43 percent of all newly constructed generation in 2012 -- overtaking natural gas and coming at a time when the demand for energy has been flat. Wind, it adds, is straining the transmission grid and hampering reliability.

“The growth in wind is driven not by market demand, but by a combination of state renewable portfolio standards and a tax credit that is now more valuable than the price of the electricity that the plants actually generate,” says its letter.

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However, several governors have come out in favor of the tax credit’s renewal, along with the American Wind Energy Association. They maintain that utilities are either building or buying wind power through power purchase agreements because it supplements their fuel diversity and it gives their customers both environmental and rate relief.

Precisely, utilities have signed more than 5,670 megawatts of new power purchase agreements. They have furthermore received approval to build 1,870 megawatts of utility-owned power, of which 1,100 megawatts broke ground in the third quarter. Year-to-date, 2,300 megawatts are underway, with activity in 13 states: Texas, Michigan, Washington and Kansas, to name a few.

Consider: American Electric Power’s Public Service Co. of Oklahoma has decided to triple its initial wind requests because of “extraordinary pricing opportunities” that will reduce its customers’ bills. Xcel Energy, meanwhile, is telling its consumers that “wind energy can save you money,” noting that its on track to cut its carbon emissions by 30 percent by 2020, from 2005 levels.

But the wind group along with the Governors' Wind Energy Coalition are expressing concern over the probable lapse. At least 85,000 U.S. citizens owe their jobs to the wind energy industry and the opportunities created by the tax credit. About 5,000 people lost their jobs last year in the midst of the credit’s uncertainty, the governors say.

The practical implications: In 2012, the governors add, the wind industry invested nearly $25 billion. But now that capital has, basically, frozen up. “The nation’s wind industry developers do not need this this tax credit forever, but they do need policy certainty in the near term to bring their costs to a fully competitive level.”

The wind energy industry’s days of being a political bargaining chip are numbered. While it could get traded again in a bigger energy bill, it may be that a final plan will be announced that would gradually -- not suddenly -- wind it down.

Twitter: @Ken_Silverstein

 

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