Will wind energy survive without tax breaks?

WASHINGTON, June 21, 2016 - Wind energy, with its zero fuel cost and zero emissions, is the fastest growing source of electricity in the United States.

One driver of wind’s growth spurt has been the federal Production Tax Credit (PTC), which makes wind more attractive to investors and has helped wind become the lowest-cost source of electricity in an increasing number of states. The American Wind Energy Association (AWEA) says the “performance-based PTC" has helped to more than quadruple wind power, from 16,702 megawatts (MW) installed at the start of 2008 to 69,470 MW by the third quarter of 2015.

Wind-rich Iowa now generates over 30 percent of its electricity from wind, a greater share than any other state, without the reliability problems that critics claim should limit reliance on intermittent energy sources like wind and solar. Texas has the largest installed wind capacity – 17,711 MW in 2015 – almost triple Iowa’s 6,364 MW – accounting for about 10 percent of all of its in-state electricity production. 

Wind won a hard-fought battle last December when Congress renewed the expired PTC for five years. Yet the extension is double-edged because the PTC phases out, dropping to 80 percent of the current 2.3 cents per kilowatt hour credit in 2017, 60 percent in 2018, and 40 percent in 2019 before disappearing in 2020.

Wind will get continuing support for 2020 and beyond simply because 10 years of PTC credits will remain available for wind projects which start construction before 2020. This extended availability means that before all PTC support ends, wind could start to benefit from the Obama administration’s Clean Power Plan (CPP) limiting power plant emissions. The CPP’s support for wind, however, depends on a major uncertainty: whether the U.S. Supreme Court will lift its current CPP stay, reject state and congressional challenges to the CPP, and allow EPA to implement its proposed first-ever limits on power plant carbon emissions.

AWEA CEO Tom Kiernan remains confident that the U.S. “can double American wind power in five years.” He forecasts that wind will grow from its current level of supplying 4.7 percent of U.S. electricity today to reach 10 percent by 2020 and 20 percent by 2030. 

At AWEA’s annual Windpower conference in May, Kiernan pointed out that “When North Carolina’s first utility-scale wind farm comes online later this year, there will be only nine states left without wind projects.” Virginia could be next in line, perhaps not only expanding onshore wind but joining Rhode Island in launching the first U.S. offshore wind projects. Kiernan explains that more states are promoting wind because “technological advances that allow wind turbines to reach stronger, steadier winds mean wind energy is more economical in more places.”

Also speaking at Windpower, Chris Brown, president of Vestas-American Wind Technology and AWEA’s new chairman, said, “We’ve driven down costs by technology advancements including longer rotors, taller towers, advanced controls, and product reliability." The next step, according to Brown, is to continue lowering wind’s costs so that wind “beats solar, and gas, without incentives.”

Warren Buffett’s Iowa-based MidAmerican Energy is an example of how far wind has advanced. “No other U.S. rate-regulated utility owns more wind-powered generation capacity” than MidAmerican Energy, the company boasts. “Our vision is to provide 100 percent renewable energy” for its Iowa, Illinois, South Dakota and Nebraska customers, it says.

On track to achieve its renewable energy goals, MidAmerican points out that “In 2015, the energy that we generated from wind equaled 47 percent of the energy sold to our retail customers in Iowa. That figure is expected to increase to 58 percent in 2017 with existing projects,” MidAmerican says. The company says that when its 2,000 MW Wind XI project is completed in 2019, “our annual renewable energy generation is expected to reach a level that’s equivalent to approximately 85 percent of our Iowa retail customers’ annual use.”

Even at its current 4.7 percent level, wind already accounts for 88,000 well-paid jobs which cannot be sent overseas and supplies enough electricity for 18 to 20 million American homes. If all goes as AWEA plans, job numbers could climb to 380,000 by 2030, with wind supplying power to some 80 million homes.

Now that more coal plants are closing across the country as utilities shift to natural gas and renewables like wind and solar, it’s no surprise that coal is fighting back. Recently, co-authors Stephen Moore and Kathleen Hartnett White launched their Fueling Freedom book defending fossil fuels by insisting that “The Obama Administration has declared war against fossil fuels – the concentrated, affordable energy on which prosperous economies are utterly dependent.” They warned that “if fossil fuel energy is supplanted by ‘green’ alternatives for political reasons, humanity will take a giant step backwards and the planet will be less safe, less clean, and less free.”

AWEA’s Tom Kiernan sees real risk from fossil fuel interests pushing back hard against wind and other renewables. He warns that even if the CPP is implemented, wind’s continued growth “will only happen if our mutual efforts keep succeeding at the state level.”

Kiernan points to “a punitive setback requirement that made it all but impossible to site a wind farm in Ohio.” Amazon has joined efforts to ease the Ohio setback rules, testifying in a state hearing in May that “Unfortunately, Ohio’s wind-turbine setback standards enacted a little more than two years ago have significantly diminished the attractiveness to further investments in wind generation in Ohio.”

In a similar battle, Kiernan says a new anti-wind bill in North Carolina “unrealistically proposes a one-mile setback and turbine sound limits of 35 decibels at the property line.” He adds that new restrictions are being considered in New Hampshire, Vermont, Michigan, Wisconsin, Oklahoma and Texas.

But attempts to limit the growth of renewables are being challenged. The recent electricity transmission report from the non-profit WIRES trade association put its conclusions in its title: “Well-Planned Electric Transmission Saves Customer Costs: Improved Transmission Planning Is Key to the Transition to a Carbon-Constrained Future.”

The report prepared by the Brattle Group for WIRES explains that “The power industry is undergoing a transition to a more extensive use of clean-energy resources.” It finds that “coal plant retirements and integrating new renewable energy resources onto the grid . . . will require a flexible and robust transmission infrastructure” – and require wise decisions now to “simultaneously improve system reliability, reduce generation capital investment costs, and integrate a diverse set of lower-cost renewable resources.”

The report points out that “Technological advances in the last decade have allowed the price of wind power contracts to fall below $25 per MW hour in the Great Plains region . . . and solar power contracts to be priced at less than $40 per MW hour in Texas and the Southwestern U.S.”

As a result of these prices which are expected to drop further, the report concludes that upgrading the national electric grid as soon as possible to fully incorporate wind, solar and other low-cost clean energy sources could generate as much as “$47 billion per year of savings in annual customer bills.”

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