Energy & Environment

Wind Energy Tax Credit Extended in Fiscal Cliff Deal

Under last week’s fiscal cliff deal, states that depend on wind as part of their energy portfolio got the production tax credit renewed for another year.
by | January 4, 2013
 

The middle class wasn’t the only group to get its tax break extended in last week’s fiscal cliff deal. States that depend on wind as part of their energy portfolio got the production tax credit renewed for another year.

The Governors’ Wind Energy Coalition, comprised of 23 member states, advocated for extending the 10-year tax credit, which is worth 2.2 cents per kilowatt hour.

“There are so many jobs that are dependent on that,” said Larry Pearce, executive director of the Governors’ Wind Energy Coalition. “It was kind of uplifting an experience when everybody got it done.”

Iowa and South Dakota, both coalition member states, use wind for 20 percent of their electricity needs, according to the American Wind Energy Association, the industry’s largest trade and lobbying group.

In 2012 both President Barack Obama and the Republican presidential candidate and former Gov. Mitt Romney, campaigned on wind energy tax credits. “I'm not going to get rid of the wind-energy tax credit that is helping to spur this incredibly dynamic sector of our economy,” Obama said in a September stump speech in Golden, Colo. Romney, citing the need for more free-market competition, argued the credit should be allowed to expire.

The Senate Finance Committee projected that new tax credits awarded in 2013 would cost the federal government $12.1 billion over their 10-year lifespan.

Congress changed the credit slightly this year, allowing for a wind project that begins construction in 2013 to qualify; in the past, the facility had to deliver electricity before the credit would kick in.

The American Wind Energy Association spent more than $1.8 million on lobbying in 2012 -- much of it explicitly for the tax credit -- and contributed $294,778 to Senate and House races in 2011-2012 election cycle, according to the campaign finance website, OpenSecrets.org.

Last year the association estimated that the extended tax credit would save 37,000 jobs, about half of the roughly 75,000 people employed by the wind energy industry nationwide.

Not all wind-energy companies are pleased with the extension. Exelon Power, which operates wind projects in 10 states, opposed extending the tax credit. Paul Elsburg, an Exelon spokesman, said the credit successfully jumpstarted the wind-power industry, but has outlived its purpose.

“At this time we think wind power should compete on its own merits with other energy sources,” Elsburg said.

Current wind-electricity production is concentrated in a handful of states such as Texas, California and Iowa, though other states are expanding their presence in the market. Nevada, for instance, built its first electric-wind facility in 2012. The American Wind Energy Association’s third quarter report for 2012 listed 93 new projects currently under construction that would qualify for the extended tax credit in states such as Illinois, Kansas and North Dakota.

A map from the U.S. Department of Energy shows the highest potential for wind-energy production in the Great Plains and Great Lakes regions, with pockets elsewhere in the country.

Scott Simons, a spokesman for DTE Energy in Detroit, said the extended tax credit would save the company an estimated $130 million for two wind parks being built in Michigan.

In a November letter to Congressional leaders, the Governors’ Wind Energy Coalition asked for an extension of at least four years to entice risk-averse investors.

“Like the oil and gas industries -- which enjoy substantial tax credits that have not expired in nearly 100 years -- wind energy, a domestic source of energy, needs a predictable policy for sustained economic growth and innovation,” the governors wrote.

Despite the group’s plea, the extension is set to expire at the end of December 2013 and Congress will have to rehash some of the debates over the tax credit’s value, casting uncertainty over the subsidy again.

Colorado, a member of the coalition, already has 16 wind electricity manufacturing facilities, with two more under construction, according to Denise Stepto, a spokeswoman for the state’s energy office.

She said the wind industry creates between 5,000 and 6,000 direct and indirect jobs, many of which would have been at risk if the tax credit expired this year.

Correction: The American Wind Energy Association spent more than $1.8 million on lobbying in 2012 -- not $1.8 billion, as the story initially read.

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