The one-year extension of a U.S. tax credit for wind power will save up to 37,000 jobs in an industry that’s expected to stall this year, the American Wind Energy Association said. The impact may not be fully felt until next year.
The production tax credit was due to expire at the end of 2012 and the extension was part of the passage of the bill to avert the so-called fiscal cliff that would have imposed income tax increases for most U.S. workers. The bill will cover all wind projects that start construction in 2013.
The wind industry lobbied all through 2012 for an extension of the credit. With its fate uncertain, the U.S. installed an estimated 11,800 megawatts of turbines in 2012, falling to 4,800 megawatts this year, according to Bloomberg New Energy Finance. With the extension, development will probably pick up in the second half of the year and may not drive significant growth until next year.
“Though too late for this year, it will allow the U.S. market to see some recovery in 2014,” Justin Wu, Hong Kong-based head of wind analysis at New Energy Finance, said by email.
Energy developers were racing to complete work by Dec. 31 to qualify for a tax credit of 2.2 cents a kilowatt-hour for power from wind farms that were complete by the deadline. Manufacturers and installers of wind turbines had sought the revised language in last week’s bill to allow for the 18 months to 24 months needed to develop new wind farms, according to the trade group from Washington.
Wind energy has the potential to supply as much as 20 percent of America’s electricity by 2030, according to projections from the U.S. Energy Department.
From the Fort Wayne News-Sentinel:
Make the industry compete in the open marketplace.
Congress is obviously incapable of passing anything without including generous portions of pork that have nothing to do with the purpose of the legislation. Thus it is no surprise that our senators and representatives took the time to stuff that desperately needed “emergency” legislation aimed at avoiding the fiscal cliff with $76 billion in special-interest tax credits for corporate giants such as General Electric and Citigroup, not to mention “green” energy companies.
Included in the package, unfortunately, was a one-year extension of the PTC – “production tax credit” – for wind energy, which amounts to 2.2. cents per kilowatt-hour for the first 10 years of electricity production from large-scale wind turbines. First enacted in 1992 with strong Republican support (hey, this is a bipartisan mess), the credit also expired in 1999, 2001 and 2003 but was always renewed. Renewing the credit will result in loss of an estimated $12 billion in tax revenue.
And the federal government has already spent almost $24 billion in the last 20 years to encourage investment in wind power, which makes it one of the most subsidized sources of energy there is. According to the U.S. Energy Information Association, wind subsidies amount to $52.48 per one million watt hours generated. Compare that to the subsidies for generating the same amount of electricity from nuclear power ($3.10), hydropower (84 cents) coal (64 cents) and natural gas (63 cents).
Shouldn’t an industry that can’t sustain itself after 20 years of being propped up be cut loose? As former Sen. Phil Gramm points out in a Wall Street Journal essay, the subsidies “waste taxpayer money, subvert the allocation of capital, and generate a social cost many times the price tag of the subsides themselves.” And there is more than the direct costs of the subsidies to consider. The subsidies for this and other forms of green energy, such as solar power and ethanol – are triggering “an inefficient and costly transformation of grid resources from low-cost megawatts to high-cost ‘maybe’ watts.”
An Indiana group that promotes renewable energy said the extension of the production tax credit for one year was critical, but a long-term step is needed for the industry to expand. “This yo-yo, sort of start-stop, start-stop, isn’t good for the long-term stability,” said Laura Ann Arnold, president of Indiana Distributed Energy Advocate.
No, the answer is to let the subsidies drop so wind can compete with other forms of energy in the marketplace. Yes, jobs will be lost, but our energy needs will never go down, so there will be plenty of employment elsewhere.
