WASHINGTON, DC, April 14, 2014 (ENS) – Last year, the U.S. wind energy industry chalked up a record number of projects and generating capacity under construction. By year end, private corporations invested billions of dollars, and new records for generation were set in many locations, according to the U.S. Wind Industry Annual Market Report Year Ending 2013, released Thursday by the American Wind Energy Association, AWEA.
But the year began slowly after Congress granted a last-minute extension of the federal Production Tax Credit for renewable energy on January 2, 2013.
The supply chain had slowed down during the months preceding the threatened tax credit expiration, explained Tom Kiernan, chief executive of AWEA, with its more than 1,300 business members.
As a result of the slowdown and the months needed to regain momentum, the industry saw a 92 percent drop in installations, down from a record 13,131 MW in 2012 to just 1,087 MW in 2013.
Yet there were a record 12,000 MW and 100 projects under construction as 2013 drew to a close.
“This boom-bust pattern could continue if policy uncertainty continues,” said Kiernan.
On its website, AWEA says, “Congress must act quickly to retroactively extend the PTC. Failure to do so will kill jobs and roll back progress that the nation has made to diversify its electricity portfolio. Extending the PTC will foster economic security and energy diversity.”
A new report by the National Renewable Energy Laboratory, NREL, released last week, shows that the federal Production Tax Credit has been critical to the development of the U.S. wind power industry and the deployment of wind generation in the United States.
First enacted as part of the Energy Policy Act of 1992, the credit establishes a production incentive for qualifying projects during the first 10 years of commercial operation and has been renewed eight times since its initial passage; renewals have often occurred near to or soon after expirations.
Most recently, the PTC was extended by one year through December 31, 2013. Although the PTC has now expired, this extension included an adjustment of eligibility criteria that is expected to result in the qualification of projects that began construction in 2013 and maintain construction into 2014 and 2015; under current IRS guidance, projects that maintain construction into 2016 might also qualify.
Opposition to the PTC comes from the American Energy Alliance, which represents the interests of oil, coal, natural gas companies. The Alliance says that keeping the wind energy’s production tax credit off the legislative agenda is one of its top priorities.
In response to attempts to include the wind production tax credit in the Senate Finance Committee’s tax extenders bill, American Energy Alliance President Thomas Pyle said April 3, “The death of the wind PTC in 2013 was a victory for taxpayers. Unfortunately, this wasteful subsidy is once again rearing its ugly head. Although not included in the initial extenders bill, Senator Grassley has made it clear that he intends to amend the bill to include the PTC. This is a case of cronyism trumping the interests of the American people.”
Senator Chuck Grassley, an Iowa Republican, supports the production tax credit because wind power is big business in windy Iowa. In both Iowa and South Dakota, wind energy topped the 25 percent milestone year-round in 2013.
Senator Grassley secured renewal of expired wind energy tax provisions in the tax measure that was approved by the Finance Committee April 3. The tax package also includes a reinstatement of a tax incentive for domestic biodiesel, another long-time Grassley priority.
“Renewable energy supports thousands of jobs and generates billions of dollars in investment across the country,” Grassley said. “Public policy continues to help renewable energy develop and generate electricity and fuel from natural resources. It’s good news for the economy and for energy diversity to restore these provisions.”
But Pyle said, “Rather than cutting wasteful handouts that would save taxpayer dollars, Senator Grassley and other PTC proponents continue to carry water for Big Wind’s well-heeled lobbyists who have been claiming for decades that the wind industry is on the cusp of economic competitiveness.”
“The notion that the wind industry is an infant that needs the PTC to get on its feet is simply not true,” Pyle said. “The PTC has overstayed its welcome and any attempt to extend it would do a great disservice to the American people.”
However, oil companies receive roughly four to five billion dollars a year in federal government subsidies, special tax treatment and incentives for things like equipment depreciation, oil depletion allowances, and foreign investment tax credits. President Barack Obama has repeatedly called on Congress to remove these subsidies.
The wind energy production tax credit works by providing a tax credit for every unit of energy produced by a qualifying facility for the first 10 years of commercial operation.
The credit enables wind developers to sell wind electricity at a lower price to power purchasers, reducing the cost of clean, renewable electricity for U.S. consumers.
Under a scenario in which the production tax credit is not extended and all other policies remain unchanged – and in which, as anticipated, there is little to no growth for electricity in the United States – wind capacity additions are projected to fall to between 3 gigawatts (GW) and 5 GW per year from 2013 through 2020, finds the NREL report.
This compares to average additions of 8.7 GW per year from 2008 through 2012.
“Reduced domestic wind power deployment is likely to have a direct and negative effect on U.S.-based wind turbine manufacturing production and employment,” finds the NREL report.
“Production tax credit extension options that would ramp down and end by 2022 appear to be insufficient to support recent levels of deployment,” states the report, adding, “Of the scenarios considered in the report, extending the production tax credit at its historical level could provide the best opportunity to sustain strong U.S. wind energy installation and domestic manufacturing.”
The report was compiled in response to a request made in October 2012 by Senator Jeff Bingaman, who has since retired. At the time, Senator Bingaman chaired the Senate Committee on Energy and Natural Resources.
Senator Bingaman requested that NREL estimate the level of continuing policy support necessary to avoid significant disruption to domestic wind industry manufacturing and employment. Funding for the work was provided by the U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy.
The NREL study, Implications of a PTC Extension on U.S. Wind Deployment, is online at: http://www.nrel.gov/docs/fy14osti/61663.pdf
By the numbers, the U.S. wind energy industry ended 2013 with 61,110 megawatts operating in the United States across 46,100 wind turbines in 39 states and Puerto Rico.
The 905 utility-scale wind projects operating across the country exceeded four percent of the U.S. electricity generation during 2013, and are now able to power the equivalent of 15.5 million American homes.
An average of $15 billion a year is invested in new projects, resulting in the industry posting 19.5 percent average annual growth over the past five years.
“Increasingly, America is powered by wind energy,” said Kiernan. “As utilities and Americans become more familiar with this affordable and reliable energy source, they want more of it. Our industry is responding with record construction numbers, more business for American factories, and more deployment of wind energy that has become a new cash crop for our farmers and ranchers.”
Wind energy has become the primary choice for new energy capacity in wind-rich regions. Between 2011 and 2013, wind energy delivered roughly 60 percent of new energy capacity in the Pacific Northwest, Plains states, and Midwest, and as much as 80 percent in the upper Midwest.
Wind energy has contributed 31 percent of all new electric generation capacity in the United States over the past five years, underscoring how both utilities and ratepayers are gaining a better understanding of wind’s affordability, reliability, and other benefits, said Kiernan.