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December 24, 2012
Wind energy incentive nears fiscal cliff

The wind energy production tax credit (PTC) will likely be a casualty of governmental failure to avoid the year-end fiscal cliff.  That scenario has prompted legislators from the top wind-energy states to campaign for another PTC extension.  Also, in recognition of the nation’s fiscal issues, the American Wind Energy Association (AWEA) informed the heads of key congressional committees that an approach wherein a full PTC extension can be gradually phased down and eliminated over 6 years would “sustain a minimally viable industry.”

The PTC provides a tax credit of 2.2 cents a kilowatt-hour once electricity is generated for the first 10-years a wind farm is in operation.  No benefit is provided simply for erecting a wind turbine–energy must be generated to earn the credits. 

75,000 jobs

In an address to the Senate, Senator Chuck Grassley (D-IA) said that the wind industry supports 75,000 jobs at more than 400 facilities nationwide.  Wind has been responsible for 35 percent of all new electricity generation added during the last 5 years, more than coal and nuclear combined, Grassley added.  Also, more than 60 percent of a wind turbine’s value is produced in the U.S. today, compared with just 25 percent in 2005.  In Iowa, wind provides 20 percent of electricity, and almost 3,000 turbines in that state annually benefit landowners with lease payments worth $14 million.  About 6,000 Iowans work in the state’s wind energy sector.  According to the AWEA, the sector is ahead of schedule in meeting a goal set by the G.W. Bush administration of generating 20 percent of all U.S. energy from wind by 2030.

Key growth factor

But gains by the sector have been heavily dependent on the PTC, and the industry sagged considerably in years when it was not available.  The AWEA says uncertainty about the PTC has caused most project plans for 2013 to be shelved.  The Association cites an independent study that estimates that 37,000 jobs will be lost by the end of the first quarter of 2013 if the PTC is allowed to expire.  “If the wind industry’s domestic supply chain is lost now, it will take years to build it back up to its current level,” the AWEA wrote in a letter to the leaders of the Senate Committee on Finance and the House Committee on Ways and Means.  In August 2012, a bipartisan majority in the Senate committee voted to extend the PTC.

Level playing field

In his address, Grassley noted “broad support” for extending the policy.  He pointed out that House legislation to extend the PTC has 119 co-sponsors, including 25 Republicans.  Grassley added that the Western Governors’ Association (WGA) has called for an extension.  The WGA comprises states with 13 Republican and 6 Democratic governors.

“The wind energy production tax credit was created to try to level the playing field with coal-fired and nuclear electricity generation,” said Grassley.  “Those who want to do away with the wind energy tax incentive don’t seem to mention that other forms of energy have received far more generous tax incentives for many decades longer than the wind energy industry has.  If we’re going to have a discussion of which industries merit federal support and which don’t, the discussion needs to be intellectually honest.  If we’re having the discussion, everything needs to be on the table, not just wind.”

Click here to read Grassley’s address.

Click here for the AWEA letter to committee leaders.

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