Journal Miffed By Bipartisan Support For U.S. Wind Power
A Wall Street Journal editorial criticizes Republicans who support extending the federal Production Tax Credit, a key tax break supporting the U.S. wind power industry. The Journal suggests that wind energy will not become competitive with fossil fuels, but energy analysts say wind is approaching that point and that the expiration of the tax credit would slow or halt that progress.
Wall Street Journal Attacks Wind Energy Tax Credit
WSJ Gets It Backwards, Suggests Industry's Need For Federal Investment Is Argument Against Federal Investment. From the May 6 Wall Street Journal editorial:
The $1.2 billion a year PTC was created as a temporary boost for green energy in 1992. It offers a 2.1 cent per kilowatt hour tax write-off for wind energy production that effectively exempts much of the industry from federal income tax. By contrast, the oil and gas companies whose tax rates Mr. Obama keeps complaining about pay some $26 billion a year in federal and state corporate income taxes.
The wind lobby is now predicting a catastrophic loss of jobs if the PTC expires, but that is because the tax subsidy has sustained the industry on a scale that wouldn't have been possible if it had to follow the same rules as everyone else. [Wall Street Journal, 5/6/12 ]
CBO: U.S. Has Long Subsidized Oil And Gas With Permanent Tax Breaks. A Congressional Budget Office issue brief on federal financial support for energy development noted that "Under current law, most of the tax preferences for energy efficiency and renewable energy will expire, but preferences for fossil fuels are permanent." CBO further explained:
Tax preferences for energy were first established in 1916, and until 2005 they were primarily intended to stimulate domestic production of oil and natural gas. Beginning in 2006, the cost of energy-related tax preferences grew substantially, and an increasing share was aimed at encouraging energy efficiency and energy produced from renewable sources, such as wind and the sun, which generally cause less environmental damage than would result from producing and consuming fossil fuels. Provisions aimed at energy efficiency and renewable energy accounted for 78 percent of the budgetary cost of federal energy-related tax preferences in 2011. However, four of those provisions, including the one with the greatest budgetary impact, expired at the end of calendar year 2011. Only four major tax preferences are permanent, three of which are directed toward fossil fuels and one of which is directed toward nuclear energy.
[Congressional Budget Office, March 2012 ]
CRS: Wind Power Incentives "Have Been Much Larger In Several Foreign Countries." Noting that federal policies in the U.S. "have been instrumental in the development of a domestically-based wind power sector," the Congressional Research Service added:
Worldwide the wind power industry is driven by various types of government support, which range from tax credits to incentive policies like feed-in tariffs. These incentives have been much larger in several foreign countries than in the United States, which has helped to spur the manufacturing of wind turbines in Europe and Asia.
The expansion of U.S. wind power generation will depend, at least in part, on government policy decisions. If state and federal governments continue to support wind generation, manufacturing of wind generating equipment in the United States is likely to increase. The production costs of U.S. plants that make turbine components appear to be competitive with those in other countries, and the difficulty and expense of transporting very bulky products over long distances serves as an obstacle to import competition. [Congressional Research Service, 9/23/11 ]
Production Tax Credit Helps Makes Wind Power Competitive With Natural Gas. From Beyond Boom & Bust: Putting Clean Tech On A Path To Subsidy Independence, a report by scholars at the Breakthrough Institute, the Brookings Institution and the World Resources Institute:
At present, the federal PTC for wind power production brings the levelized cost of electricity from new wind power projects down to an estimated range of $33-65 per megawatt-hour (MWh), depending on the quality of wind resource.
At these prices wind power is broadly competitive with new gasfired generation (with levelized costs as low as $52 at likely gas prices, see Box 1), supporting robust market expansion.
However, the PTC is scheduled to expire at the end of 2012, creating significant market uncertainty and prompting manufacturers of wind turbine components to prepare for layoffs and substantial market contraction. [Brookings Institution, April 2012 ]
Market Analysts: PTC Expiration Would Cause Wind Installations To Collapse. From the Brookings report:
Without the PTC, the unsubsidized cost of a typical new wind power project ranges from about $60-90 per MWh (for "Class 3" and above wind sites), making wind energy competitive with gasfired generation only in the best of wind regimes with ready access to existing transmission capacity.
Very few of these ideal sites remain available for development. If the PTC expires without any replacement, market analysts expect annual wind energy installations to collapse from a projected peak of 8-10.5 gigawatts (GW) in 2012 to just 1.5-2 GW in 2013. [Brookings Institution, April 2012 ]
Uncertainty Over Renewal Of PTC Already Affecting Industry. From a February 17 ClimateWire article:
Although the tax credit does not expire until the end of 2012, the industry has long argued that companies can't wait until the eleventh hour to know whether the credit will be extended. Manufacturers, in particular, require significant lead time on any projects scheduled for 2013, meaning that uncertainty after Dec. 31 can cause them to slow down operations as much as 12 months in advance.
The unidentified industry official pointed out that, to date, no wind turbine orders have been placed for 2013. [ClimateWire, 2/17/12, via Nexis]
CRS: When PTC Previously Lapsed, Wind Installations "Slowed Or Collapsed." From a September 2011 Congressional Research Service report:
The PTC, the main policy tool in the deployment of U.S. wind power, was first adopted during the administration of President George H.W. Bush as part of the Energy Policy Act of 1992 (P.L.102-486). It has been a significant driver of the recent growth of the U.S. wind industry. In each of the years during which the PTC lapsed (2000, 2002, and 2004), meaning that it expired prior to being renewed, the level of additional deployed wind capacity slowed or collapsed when compared to the previous year's total: 93% in 2000, 73% in 2002, and 77% in 2004. [Congressional Research Service, 9/23/11 ]
The following chart from the World Resources Institute shows how the industry was affected when the PTC was allowed to expire in 1999, 2001 and 2003. WRI calls for more stable and predictable policies including feed-in tariffs, renewable energy standards or a price on carbon.
[World Resources Institute, 9/2/10 ]
Journal Hides Growth, Progress Of Wind Power Industry
WSJ Falsely Suggests Wind Industry Has Not Progressed Since 1970s. From the May 6 Wall Street Journal editorial:
The lobby's spin is that wind power needs one last push to become economically sustainable. They've been saying that since the Bee Gees were cool and Jimmy Carter was President. But it isn't the 1970s any more, even if Messrs. Reichert and King want to stick the rest of us with a 1970s energy policy. [Wall Street Journal, 5/6/12 ]
Business Groups: U.S. Wind Manufacturing Has Grown 12-Fold. From a letter by over 350 coalition members including the National Association of Manufacturers, the American Farm Bureau Federation, and the Edison Electric Institute:
Equipped with the PTC, the wind energy industry has contributed impressively to U.S. economic development. Since 2005, the wind industry has spurred more than $60 billion of investment. Today, over 400 facilities across 43 states manufacture for the wind energy industry. US wind turbine manufacturing has grown 12-fold - 60% of a wind turbine's value is now produced here in America, as compared to 25% prior to 2005. Further, costs have been reduced over 90% since 1980, recently driven by a surge in game changing technological advances. In the last four years, wind energy has provided 35% of all new U.S. power capacity.
Yet despite its clear success, the PTC has been allowed to expire frequently and is again set to expire at the end of 2012. Now is not the time to increase taxes on wind energy. The PTC should be extended for at least another four years so that American know-how can keep producing domestic clean energy. [National Association of Manufacturers, 11/17/11 ]
Study: Wind Sector Has Seen Important Technological Improvements. From a February 2 ClimateWire article:
The findings, published by Lawrence Berkeley National Laboratory and the National Renewable Energy Laboratory, show that it cost between 25 and 40 percent less to produce wind energy on a per-kilowatt-hour basis today than it did in 2002-2003. Those savings came as developers were able to better spread out capital costs, increase the size and scale of wind farms, and enjoy federal tax incentives.
But technology advances were also a major driver behind the wind sector's overall lower costs, especially as vendors brought new, taller turbine towers and longer rotor blades to market. Those two improvements alone allowed for many newerwind farms to produce significantly more electricity on a per-turbine basis.
"We really have seen a sizable scaling of the technology over the last few years," said Ryan Wiser, a staff scientist at Lawrence Berkeley who co-authored the analysis. "In particular, those technological improvements have benefited developers in some of the lower-quality wind areas," where wind power development would not have been feasible a decade ago.
In fact, the analysis found that the amount of U.S. land area with ideal siting conditions for wind power has increased by between 130 and 270 percent since 2002-2003 due to improvements in turbine technology. Similarly, land area that can produce wind power for less than 5 cents per kilowatt-hour -- a price that makes wind competitive with natural gas -- has increased by almost 50 percent over the same period. [ClimateWire, 2/2/12, via Nexis]
Bloomberg New Energy Finance: "Average Wind Farm Will Be Fully Competitive By 2016." From a November 2011 Bloomberg New Energy Finance report:
The cost of electricity from onshore wind turbines will drop 12% in the next five years thanks to a mix of lower-cost equipment and gains in output efficiency, according to new research from Bloomberg New Energy Finance.
The best wind farms in the world already produce power as economically as coal, gas and nuclear generators; the average wind farm will be fully competitive by 2016.
Justin Wu, lead wind analyst at Bloomberg New Energy Finance, said: "The public perception of wind power tends to be that it is environmentally-friendly, but expensive and intermittent. That is out-of-date - in the best locations, where generation is already cost-competitive with fossil fuel electricity, and that will be the case for the majority of new onshore turbines installed worldwide by 2016. [Bloomberg New Energy Finance, 11/10/11 ]
Wind Power Jobs Have Been Growing Robustly. From a March 7 ClimateWire article:
One factor working in the industry's favor is its emergence as a major employment sector, with an estimated 78,000 workers drawing paychecks either from wind power developers or from firms involved in the wind turbine supply chain.
Organizers of the Chicago summit were quick to note that much of the industry's domestic supply chain is anchored in the Midwest, with hundreds of firms in former Rust Belt regions of Illinois, Michigan and Ohio contributing to the wind power sector. At the same time, farm states like Iowa and North Dakota are rebuilding local economies around the manufacture of turbines, blades and towers that once had to be imported from Europe and Asia.
That contrasts sharply with conditions from just a few years ago, when only 25 percent of the U.S. wind industry's components were manufactured in the United States, a figure that grew to more than 60 percent by last year as local supply chains took hold. Increasingly, wind means U.S. jobs
"One of the differences between the extension of the PTC previously and the extension of the PTC this time around is that there is a lot more local jobs, and the potential for a lot more local jobs to be lost, due to the extension of the PTC," said Acciona's Foley, whose firm is one of more than a dozen major wind industry companies with headquarters in Chicago.
Ralf Sigrist, president and CEO of Nordex USA Inc., which in late 2010 opened a $40 million turbine manufacturing plant in Arkansas, said the increasing size, weight and complexity of wind power equipment made shifting the company's manufacturing base from Europe to the United States a key element in its growth strategy.
Moreover, the wind energy industry's robust expansion in the United States has helped stem the erosion of domestic manufacturing jobs while also giving a boost to farmers by creating new revenue streams that allow farms to remain profitable when prices for agricultural commodities fall, he said. [ClimateWire, 3/7/12, via Nexis]
Wind Boom In Texas Attributed To Production Tax Credit. From an October 19 ClimateWire article:
The production tax credit is widely seen as a key driver of the Texas wind boom. It lowers the cost of producing wind power by 2.2 cents per kilowatt-hour, providing a financial edge that has helped developers compete with low-priced electricity derived from coal and natural gas.
The credit, called the PTC, was so instrumental in the state's rise to wind dominance that a report issued by [Republican Governor Rick] Perry's office last year described it as a "crucial" piece in a broad plan to lower the price of wind energy. It complemented a state mandate requiring utilities to use more renewable energy and a fee-based program designed to carry far-flung wind power to urban centers along new transmission lines. [ClimateWire, 10/19/11, via Nexis]