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Election brings renewed hope for wind energy subsidy

  • The Wichita Eagle
  • Published Saturday, Nov. 17, 2012, at 11:57 p.m.
  • Updated Monday, Nov. 19, 2012, at 7:23 a.m.

A breeze may be slowly stirring again for the wind energy industry after months of sitting becalmed.

The election results have picked up the hopes of proponents of wind energy for some kind of renewal of the most important subsidy for wind power, the production tax credit.

The tax credit expires Jan. 1 and the American Wind Energy Association has warned that the loss will lead to 37,000 layoffs as demand for new wind turbines and wind farms drops sharply.

Throughout the year, the U.S. House of Representatives, dominated by conservative Republicans, opposed reviving the production tax credit. U.S. Reps Mike Pompeo, R-Wichita, and Tim Huelskamp, R-Fowler, have been out front in their opposition, saying that the tax credits distort the free market.

The tax credit is worth 2.2 cents per kilowatt hour for wind power utilities.

In 2012, wind farm developers redoubled construction to beat the deadline, saving little for next year. In September, Siemens Wind Energy announced that it would cut 110 temporary contract workers at its Hutchinson turbine plant immediately and lay off 146 regular employees in two months. The employees are scheduled for their last day on Monday, dropping employment from more than 400 this summer to about 150.

Siemens did announce this week that it has won contracts for turbines destined for southern California and Chile that would keep the remaining workers employed.

Shifting mood

But with the election, the political mood may be shifting enough to allow some kind of short-term production tax credit extension before the end of the year, say industry officials.

Democratic President Barack Obama, who strongly backs alternative energy was re-elected. Republican candidate Mitt Romney was far less committed to it. And Democrats added a few seats in the Senate and House of Representatives.

The production tax credit has bipartisan support. For instance, Kansas’ two senators, both Republican, support its extension.

On Tuesday, Kansas Gov. Sam Brownback and governors from three other strong wind power states – two Democrats and two Republicans – again called on Congress to extend the tax credit.

Longer term, say industry officials, the tax credit will likely be part of a broader discussion to raise or restructure taxes next year.

“I am optimistic that we will see a renewal of some sort,” said David Boyce, CEO of Wind Capital Group. “That said, Congress has a lot left to achieve in the grand scheme things. So I’m optimistic that there are a host of matters that will fall under an extenders bill and PTC is one of them.”

On Wednesday Boyce dedicated his company’s newest wind farm, Post Rock Wind Farm near Ellsworth. The wind farm has a 201 megawatt capacity.

Kansas is slated this year to roughly double its wind generation capacity to more than 2,000 megawatts.

Lame duck deal

During a panel discussion for lobbyists for the alternative energy industry, hosted by Washington law firm Chadbourne & Parke, on Nov. 8, all of the participants foresaw some kind of short-term extension of the production tax credit.

"We are in a much better position moving into the next Congress and in the lame duck," Gregory Wetstone, vice president of government affairs for wind farm developer Terra-Gen Power, said at the time.

"We are looking at a two-step dance here where we get a year or two, and then we come back to the tax reform debate," he said.

But they also didn’t foresee much momentum for other incentives, such as federal loans or grants, which were part of the 2009 stimulus spending, or a national requirement for utilities to have a certain percentage of power generated from renewable sources, called a renewable energy standard.

Alternatives

If the production tax credit is not renewed, Boyce said, the impact on the industry depends on the circumstances.

The worst outcome would be if uncertainty hung over whether a tax credit or other large incentive would be renewed, he said. Wind farm developers would hold back to see if one would be enacted, killing any development.

If the tax credit was ended and there was no chance of it returning, that would be clearer, he said. Developers would make a call based on the availability of financing and the economics of the location and market.

Although the cost of generating wind energy has dropped significantly, it is still not competitive with the lowest cost energy.

The slow economic recovery and extremely low cost of natural gas would continue to provide a significant challenge to wind power without the tax credit, Boyce said.

But at this point, those in the industry remain encouraged by the political situation in Washington, although they remain watchful.

“I use this term ‘hunker-down mode,’ ” Boyce said. “Let’s just preserve and weather the storm and weather the uncertainty and come out the back end.”

Reach Dan Voorhis at 316-268-6577 or dvoorhis@wichitaeagle.com

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