Does Wind Energy’s Fate Rest Upon the Fiscal Cliff?

In two weeks, the renewable energy Production Tax Credit (PTC) and offshore wind Investment Tax Credit (ITC) will expire, ending an ongoing heated national debate.  The decision to renew the PTC and ITC for an additional 6 years (currently projected to cost $50 billion) is just one of the “fiscal cliff” decisions that will be made in Washington by the end of the year.

Concerns over the looming debt crisis in this country have created an established base of politicians who oppose extending the credits for an eighth time.  Sen. Lamar Alexander (R-Tenn) wrote a strong argument against the tax credits on Monday:

“This subsidy should not be extended, first, because a government that borrows 42 cents of every dollar it spends can’t afford it.  Second, US Energy Secretary Chu has testified that wind is a “mature” technology.  Third, after 20 years and billions in subsidies, wind produces only 3 percent of our electricity.  Fourth, such large subsidies distort the marketplace, making coal and nuclear uncompetitive.  Replacing such baseload power with electricity that is produced only when the wind blows is the energy equivalent of going to war in sailboats when nuclear submarines are available.  Finally, giant turbines and their power lines strung along scenic mountaintops destroy the environment in the name of saving the environment.”

Alexander continued by advocating the use of saved funds for increasing research for other renewable energies, advanced bio-fuels, and funding for disposal of nuclear waste.

In light of ongoing concerns for the PTC and ITC’s survival, the American Wind Energy Association (AWEA) went so far as to send a proposal to Congressional leadership earlier this month asking for an immediate extension on the debated tax credits.  In turn, the AWEA would be willing to cut the funding to its own industry down to 90% in 2014, 80% in 2015, 70% in 2016, and 60% for 2017 and 2018.  A part of the proposal reads, “[t]he wind industry recognizes that our country is facing significant fiscal challenges and is supportive of all energy technology incentives being reviewed and even phased down when Congress considers tax reform.”  Opinions of the proposal have ranged from diplomatic to bold to desperate, yet the prevailing wind from Congress has been becalmed – no action has been made at this time from the offer.

However, there is a fair share of hope in the wind energy industry, citing the substantial job growth and economic benefits that losing the PTC/ITC exemptions would decimate.

Although Congress has remained mum on the issue, the US Department of Energy (DOE) hasn’t backed off from wind energy prosperity.  The DOE announced up to $28 million worth of new wind energy investments across seven separate projects on December 12.  The projects will be located offshore from Maine, New Jersey, Ohio, Oregon, Texas and Virginia, with up to $4 million being provided for each.

Forbes completed a write up this week on the Ohio-based “Icebreaker” project.  The project will accomplish two firsts for the industry; “Icebreaker” is the first project to be attempted on the Great Lakes, and is the first wind project on fresh water which will greatly benefit operational equipment due to a lack of salt-water corrosion.  The 20-25 megawatt plan will provide 500 new jobs during the installation phase, while 10% of those positions will remain permanent for proper maintenance and administrative purposes.

Paul Williamson of the Maine Wind Industry Initiative is a strong proponent of progress for wind energy for his state:

“Wind energy development has greatly benefited the Maine economy with local investments exceeding $1 billion and the creation of local jobs… our recent survey of 47 Maine companies found that $279 million of their revenues was derived from wind-related activities.  Of that, 47% of the revenues were generated from Maine projects.”

The state completed a study in late November that found existing wind generation in Maine avoids emissions of over 400,000 metric tons of carbon dioxide, 670 tons of smog-forming nitrogen oxides, and 1,110 tons of soot-forming sulfur dioxide and saves 155 million gallons of water annually – enough to provide water for 7,000 people.  With their continued development, Maine officials expect those figures to nearly double in less than five years.  Of course, this is contingent upon the PTC/ITC being extended.

One place many wouldn’t expect to hear much about the impact of wind energy is North Carolina, whose presence in wind energy is in its infancy according to the Energy Information Administration.  However, approximately 2,000-3,000 wind-sector manufacturing jobs exist within the state.  Many of which are based at Nucor Steel, headquartered in Charlotte.  Dr. Johan Enslin, director of UNC-Charlotte’s Energy Production and Infrastructure Center, also believes there will be an impact on engineering positions in-state without substantial wind energy projects to develop.  He states, “[a] number of these engineers will design power plants, including wind power plants, and they may have to look at other venues for their job opportunities.”

As Senator Alexander mentioned above, it is true that wind power only produces 3 percent of our electricity supply currently.  He makes valid points regarding how progress has been slow despite the amount of money that has been devoted to wind energy in the past is staggering.

However, Alexander leaves out that wind energy is the fastest-growing American renewable energy source for electrical generation the last ten years; nearly quadrupling in generation capacity between 2006 and 2011.  Another figure that Senator Alexander fails to mention is that the costs of wind energy have dropped nearly 90% since 1980.

Furthermore, when the PTC was allowed to expire in 1999, 2001, and 2003 – annual wind installations plummeted between 73 and 93 percent.  Granted, the actual figures in ’99, ’01, and ’03 were much smaller, so it’s very debatable that wind installations would see percentage drops that drastic – but it does give an idea of the impact the PTC/ITC has on the industry.

The point is that in terms of the most recent figures and trends in the industry, the DOE projects wind energy could encompass 20 percent of US energy consumed by 2030.  While it’s fair to question such an impressive spike in a short period of time, the sizable strides the industry has made in recent history are extraordinary.  The need to continually develop wind energy is imperative, and if the PTC/ITC expire at year’s end, it appears certain that the industry will be handicapped moving forward.

Kristopher Settle
Energy Curtailment Specialists, Inc.

Kris can be found on Twitter and Google+.

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