This Week in Clean Economy: Wind Power Tax Credit Extension Splits GOP

The wind industry’s hopes for extending a key federal subsidy got a sharp jolt in recent weeks.

Some Republicans inside and outside Washington, along with the conservative U.S. Chamber of Commerce, have broken with many in their party to take a pro-green stance on the production tax credit (PTC) for wind projects. Wind operators say the 20-year-old subsidy allows them to compete with conventional fuels and supports thousands of jobs. It expires at the end of this year.

The American Wind Energy Association told InsideClimate News that federal support for wind has always been bipartisan, but Republicans are feeling pressure to speak out because of what’s at stake. “Manufacturing jobs are on the line,” said Ellen Carey, a spokesperson for the trade group. Lawmakers are “hearing from their constituencies who are employed in this industry.”

Last week two GOP governors, Terry Branstad of Iowa and Sam Brownback of Kansas, sent a letter to the  20-member House-Senate committee that is negotiating a deal to extend the payroll tax holiday, asking members to fold a four-year PTC extension into the deal. Iowa ranks No. 2 in the nation for installed wind capacity behind Texas. Kansas is fourteenth but No. 1 for turbines under construction.

“Our states have experienced the economic benefits of wind energy first-hand,” the governors wrote in their Feb. 1 letter. They pleaded for an immediate extension “so the wind industry has the certainty it needs to grow.”

The U.S. chamber stunned many by expressing a similar position. The trade group is a longtime opponent of climate legislation and EPA rules limiting power plant emissions.

Speaking to a senate finance committee last week, Caroline L. Harris, the chamber’s director of tax policy,urged Congress to “act now” to extend the PTC, saying “the damage is real” when such provisions lapse.

This week most of Colorado’s Congressional delegation, including two Republicans, sent their own letter to the payroll tax committee urging a PTC extension. Colorado ranks third in the nation in terms of the amount of electricity it produces from turbines. It is also home to four wind manufacturing plants, including the world’s largest wind-tower factory in the town of Pueblo.

“In a difficult economy, with thousands of high-quality jobs at stake across our state and the entire country, we urge the conference committee to extend the wind PTC as part of your upcoming package,” the lawmakers wrote in a Feb. 7 letter.

The vocal support of the PTC is a departure from the position of many conservative Republicans in Congress.

For months the GOP-led House has used Solyndra, the solar startup that received $528 million in federal loans before it went bankrupt, to question the wisdom of federal green energy spending. Last week a pair of Tea Party-affiliated U.S. senators, Jim DeMint of South Carolina and Mike Lee of Utah, introduced a bill that would end all energy tax credits. The legislation is a companion to an existing bill in the House sponsored by Rep. Mike Pompeo (R-Kansas) and 18 Republican co-sponsors.

Supporters of these bills argue that the entire energy industry should stand on its own. “We shouldn’t favor ethanol over hydrogen, nuclear over natural gas, or oil over renewables,” DeMint said in a statement. “The free market economy works when everyone competes on a level playing field.”

But AWEA says the PTC has paid off in jobs, and half the country’s wind workforce, some 40,000 jobs, could be lost if it’s left to lapse this year, according to industry projections.

Colorado could be especially vulnerable to job losses. Roughly 6,000 residents work in developing and installing wind projects and manufacturing turbines. About a third of them are employed by Vestas, the Danish wind turbine maker that has pumped more than $1 billion into building the state’s four manufacturing facilities. 

Last month the company said it might have to lay off 1,600 American employees if the PTC expires this year.

The Congressional committee negotiating the payroll tax deal has until Feb. 29–when an earlier, two-month extension runs out– to extend the tax holiday by 10 more months.

Its passage is far from certain. Talks stalled this week as Democrats and Republicans clashed over how to pay for the bill, The New York Times reported. That could hurt the chances of the PTC getting much priority.

Some wind executives now say they’ll settle for a one-year extension. “Our ask on the Hill … this week is a one-year, full-value extension of the production tax credit,” Steve Lockard, president and CEO of TPI Composites, a wind turbine blade manufacturer, said on Thursday at a panel organized by AWEA.

Another option is a four-year extension through a House bill that’s been around since November. Reps. Dave Reichert (R-Wash.) and Earl Blumenauer (D-Ore.) introduced the American Renewable Energy Production Tax Credit Extension Act of 2011, which now has bipartisan support from more than 60 co-sponsors.

Its chances are even bleaker, and the fact that it’s an election year won’t help, said Rob Gramlich, AWEA’s senior vice president of public policy. Bills aimed at specific tax measures “almost never move on their own,” he told North American Wind Power late last month, adding that “history shows us that it is hard to move policy in the summer and fall of an election year.” 

Hydro, Geothermal & Biomass: But What about Us?

What about other renewable energy industries that are similarly facing an end to the production tax credit?

On Wednesday, executives from the hydropower, geothermal and biomass industries called on Congress to either pass the U.S. House’s PTC extension bill, which covers their industries as well as wind, or include a special provision in the payroll tax deal.

It’s likely to be an even tougher sell than wind companies have in their campaign because their PTC doesn’t lapse until the end of next year.

Still, the industries say the threat of expiration has already slowed construction. “The geothermal industry has reached its so-called tax-credit cliff,” Karl Gawell, executive director of the Geothermal Energy Association, said on a Wednesday call with reporters. He cautioned that 3,000 geothermal jobs are on the line.

The executives say their projects take a long time to permit and build—anywhere from four to eight years compared with 18 months to two years for a wind farm. Because of that, the private sector is tentative to make large upfront investments without certainty the tax credit will exist in coming years. The incentive lowers overall project costs and shortens the length of time it takes for plants to start turning a profit.

The geothermal, biomass and hydropower industries have received support from the PTC since the Energy Policy Act of 2005. Like wind farm operators they get about 2 cents for every kilowatt-hour of electricity the facilities produce in the first decade of operation.

The tax incentive has ushered in a “renaissance” of projects, the executives wrote in a Feb. 8 letter to Congress. They said if the PTC isn’t extended to at least 2016, as the House bill would do, it could “undermine the progress our industries have made in recent years.”

When asked if it was “likely” that the PTC would at least get included in the payroll tax bill, Gawell said, “‘likely’ is a tough word with this Congress.”