WASHINGTON, March 25, 2015 -- Expect the Protection Tax Credit (PTC) for wind energy that expired in December to be renewed this summer along with other tax breaks – but not until Congress has made its best – and ultimately futile -- effort to agree on comprehensive tax reform.
That’s according to Sen. Chuck Grassley, R-Iowa, who co-chairs a bipartisan Senate Finance Committee working group tasked with delivering tax reform recommendations by May. Ideally, tax reform legislation would eliminate most or all of 53 special tax breaks such as the wind energy PTC that Grassley has championed ever since he wrote the first PTC bill for wind back in 1992. That’s because wind and other renewable energy industries wouldn’t need special breaks renewed each year if tax reform eliminates the permanent tax breaks for their coal, natural gas, oil and nuclear competition
“Right now, we’re going through this process of tax reform, and if there’s going to be tax reform, everything is on the table,” Grassley toldAgri-Pulse. “But I don’t think there is going to be tax reform even though I am part of a working group to make it happen and I want it to happen.”
So Grassley is working hard to achieve tax reform which Senate Finance Committee Chairman Orrin Hatch, R-Utah, considers the panel’s top priority. Grassley explains that as long as the larger issue of overall tax reform is on the table, “you aren’t going to be talking about tax extenders,” but that “if we don’t have tax reform, you’ll have the tax extenders.” He adds that until wind energy becomes fully competitive, “we will have to have the tax incentive for another three to five years.”
He says that once an industry is mature, whether it’s wind or any other industry, “it ought to stand on its own” and that “the government should quit trying to “pick winners and losers.” So he concludes that “a phase-out has to be part of the extension of the wind energy tax credits.”
Likely 2016 GOP presidential candidate Jeb Bush told the March 7 Ag Summit in Iowa that he thinks wind energy is already competitive, and he agreed that wind’s PTC should be phased out in three to five years. One Senate staffer dealing with tax issues tells Agri-Pulse that the current focus on comprehensive tax reform “will likely delay any sort of conversation regarding extenders until the end of the year.”
Currently the wind PTC delivers a 2.3 cent tax credit for every kilowatt-hour of electricity an eligible wind farm produces in its first 10 years. Qualifying wind farms have the option to swap their PTC for an Investment Tax Credit or an equivalent cash grant from the U.S. Treasury. Wind projects started in 2014 can qualify if they are operational by December 2016.
So wind is benefiting from the PTC while it lasts. Earlier this month, the Energy Department issued a 350-page report, Wind Vision: A New Era for Wind Power in the United States, which concludes that “Wind power systems are now seen as a viable and competitive source of electricity across the nation” capable of supplying 10 percent of U.S. end-use electricity demand by 2020, 20 percent by 2030, and 35 percent by 2050. Yet the report warns that with wind providing more than 4.5 percent now, the industry sits “at a crossroads between the opportunities of higher energy penetration and the challenges of increased competition, policy uncertainty, access to transmission and lower energy demand.”
American Wind Energy Association (AWEA) CEO Tom Kiernan says the industry stands ready to double U.S. wind energy over the next five years. But he insists that achieving the 10 percent goal by 2020 will require “a stable federal PTC and greater use of wind by states to comply with the (EPA’s proposed) Clean Power Plan.” He calls on Congress to provide the same “long-term, stable policy it provides to other energy sources.”
Kiernan says AWEA is optimistic that Congress will extend the PTC this year and is “encouraged to hear GOP presidential hopefuls and U.S. Senator Chuck Grassley say they are in favor of a multiyear extension of the Production Tax Credit . . . Renewing the Production Tax Credit for as long as possible helps wind energy continue to become cost-competitive and maintain a diverse U.S. power grid.”
The U.S. Energy Information Administration (EIA) earlier this month confirmed that wind continues to increase its share of the U.S. electricity market. Based on scheduled power plant additions and retirements, EIA reports that of about 20 gigawatts (GW) being added to utility-scale generating capacity in 2015, the leading shares will be in wind (9.8 GW), natural gas (6.3 GW) and solar (2.2 GW). Meanwhile, 12.9 GW of coal-fired generation will be retired along with 2 GW of natural gas generation.
Critics of renewable energy charge that wind and solar are too unreliable to become major players. But reliability concerns are undermined by the EIA reporting that for 2014, wind supplied 28.5 percent of Iowa’s electricity, 25.3 percent in South Dakota, and 21.7 percent in Kansas.
Despite wind energy’s rapid growth, the industry continues to face hurdles, including the logistical problems in moving some of the super-sized parts of a wind turbine, which can have a diameter in excess of 100 yards, or longer than a football field.
Yet the logistical challenges have a silver lining: Wind turbine parts increasingly must be manufactured as close as possible to where they will be installed, benefiting U.S. suppliers and job growth in every state pursuing wind energy.
A greater challenge comes from federal and state legislation, with states including Texas, Kansas and Oklahoma currently considering bills to rein in their wind energy programs. At the federal level, each time Congress has failed to renew the PTC for wind, investment and new wind generation have plummeted.
Despite challenges, wind energy continues to have ardent supporters, even in oil-centric Texas. The state’s Public Utility Commission, for example, provides a “Power to Choose” website where consumers can compare electric rates, with 100 percent renewable energy plans among the lowest-cost in some areas.
Wind’s critics continue to charge that wind is a high-cost, unreliable alternative to cheap coal. But the Texas PUC site endorses renewable energy, explaining that “Texas has tremendous potential to generate renewable resources that greatly enhance the diversity of our electric grid. The two main advantages to using renewable energy are that it’s clean and it’s unlimited, which reduces the demand for non-renewable sources of energy, such as coal, oil, and natural gas.”
Thanks to support such as the Texas PUC’s endorsement and new transmission lines to ship power from wind-rich West Texas and the Panhandle to major Texas cities, it’s no surprise that Texas tops the list of states in terms of total wind deployment.
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