Congress Should Renew Wind Production Tax Credit

December 21, 2012
Kevin Knobloch
Former contributor

While President Obama and House Speaker John Boehner tangle over the fiscal cliff and the nation is (appropriately) focused on gun control, Congress is playing with the future of the wind industry by dithering over whether to renew the wind production tax credit. The tax credit has helped make the wind power industry one of the few bright spots in a sluggish economy, and it is one of the most promising carbon-free energy sources. To ensure the health of the wind industry, Congress should renew the wind production tax credit before the current session closes at the end of this month.

The production tax credit has led to extraordinary results

Image: Charles Cook; Flickr Commons

The tax credit provides a credit of 2.2 cents per kilowatt-hour of electricity produced by wind turbines — as well as geothermal, biomass, and underwater turbines — for the first 10 years of production, which helps level the playing field between wind and coal and natural gas. Its “cost” is in lost revenue to the Treasury, estimated at $1.36 billion a year between now and 2015 if renewed by Congress, according to the Congressional Joint Committee on Taxation.

The credit, in turn, leverages $15.5 billion in private investment each year, according to the American Wind Energy Association, and has led to extraordinary results. Over the last five years — with the help of the tax credit, state renewable electricity standards and stimulus spending — U.S. wind capacity has more than tripled. And that growth has powered a rebirth of American manufacturing: U.S.-based wind turbine, blade, tower and gearbox manufacturing has nearly doubled from 35 to 67 percent since 2005.

Image: Wind Capital Group

Tens of thousands of jobs are at stake

Unlike a number of fossil-fuel and nuclear-power subsidies that are decades-old and permanent, the tax credit, which debuted in 1992, has to be renewed by Congress every few years. That puts the relatively new wind industry at a distinct disadvantage, making it difficult to attract investors and plan years in advance.

If Congress doesn’t extend the tax credit, tens of thousands of wind industry employees will lose their jobs. A December 2011 study by Navigant Consulting estimated that investment in wind projects would drop 65 percent and the industry would have to lay off nearly half of its workforce—some 37,000 people—next year. Given the uncertainty, layoffs already have begun across the country.

Congress has spent substantially more to support fossil fuels and nuclear power

Those calling for Congress to kill the tax credit ignore the fact that Congress historically has spent substantially more to encourage fossil fuels and nuclear power than carbon-free renewable technologies.

According to a 2011 study by DBL Investors, a venture capital firm, the nuclear industry benefited from an average of $3.5 billion in subsidies a year (in today’s dollars) from 1947 to 1999 that continue to this day. Coal, which has been receiving government subsidies since the early 1800s, currently receives roughly $3.2 billion a year, based on Energy Information Administration data from 2007. Meanwhile, the oil and gas industry, according to DBL, has benefited from nearly $5 billion in annual subsidies in today’s dollars since 1918, nearly 100 years ago.

Compared with oil and gas, coal and nuclear, wind power is a fledgling technology that deserves a similar sustained commitment by U.S. policymakers, especially given the co-benefits of cleaner air, less global warming pollution, and greater energy security that wind power contributes.

Wind power is a reliable energy source with tremendous potential

Image: steve p2008; Flickr Commons

Contrary to what some critics say, wind power is reliable. In 2011, wind power provided 22 percent of South Dakota’s annual electricity needs, 19 percent of Iowa’s, and more than 10 percent of North Dakota’s, Minnesota’s and Wyoming’s, without compromising reliability, according to researchers from Lawrence Berkeley National Laboratory.

And on April 15 of this year, Xcel Energy—the largest U.S. retail wind power provider—set a new U.S. record when it generated more than 57 percent of the electricity needed to supply its customers in Colorado on a night when the winds were strong and electricity demand was low. According to Steve Mudd, product manager for Xcel Energy’s Windsource program, “What each of our world records shows is that while wind is intermittent, it can be relied upon.”

Finally, the potential for wind and other non-hydro renewables is tremendous. They currently generate only about 5 percent of U.S. electricity, but by 2030 they could produce more than 40 percent, according to a 2009 UCS study. That would more than replace the share currently generated by coal, which is still responsible for roughly 75 percent of U.S. utility sector carbon emissions. Looking even further down the road, the National Renewable Energy Laboratory concluded earlier this year that today’s commercially available renewable technologies could adequately generate 80 percent of U.S. electricity by 2050.