Unusual coalitions clash over wind energy tax credit
George Frey/BLOOMBERG – Wind turbines stand at the mouth of Spanish Fork Canyon in Spanish Fork, Utah.
The wind power industry boasts enviable political assets in its fight to preserve a prized tax benefit. Republican and Democratic governors trumpet the benefits of wind energy; industry officials can identify manufacturing jobs at risk in crucial presidential election swing states if the tax credit expires; and a phalanx of lobbyists and consultants are working to ensure it stays in place for at least one more year.
But now an unusual coalition is fighting the extension, including tea party followers, GOP presidential nominee Mitt Romney and the electric utility most closely associated with President Obama.
The result is an unpredictable and intense lobbying fight.
“This is a pivotal moment for that industry,” said David G. Victor, an international relations professor at the University of California at San Diego and an energy expert.
The battle over the wind production tax credit — which can cut the cost of developing a wind project by nearly a third — centers on a single question: Is the wind industry mature enough to survive without the tax break it first received 20 years ago, or does it need a lifeline for a bit longer?
As the Dec. 31 expiration deadline looms, wind manufacturers and their suppliers are shedding jobs and scaling back operations. Siemens Wind Power, a major turbine manufacturer, announced Tuesday it was laying off more than 900 employees. Earlier this month, wind tower maker Katana Summit said it would shut down plants in Nebraska and Washington, putting nearly 300 out of work, while wind blades manufacturer Molded Fiber Glass announced it would pink-slip 92 of its 370 workers in Aberdeen, S.D.
“Companies have been investing on the basis that [the tax credit is] there,” said Joseph A. Stanislaw, an economist who runs the JAStanislaw Group. “It changes the game. Every time you pull it, or threaten to pull it, you throw the industry into disarray.”
Liz Salerno, chief economist for the American Wind Energy Association, said in an interview that while wind has made technological advances and is increasingly competitive with traditional sources of energy, the uncertainty surrounding federal policy has rattled the industry.
“It’s hard to make those new investments in bringing down costs when you don’t know what the world will look like a hundred days from now,” Salerno said.
The layoffs have been particularly potent because several swing states — including Iowa, Colorado and Ohio — have significant wind manufacturing. The industry accounts for more than 3,200 current or planned manufacturing jobs in Iowa and 3,000 in Colorado, according to AWEA. Ohio ranked as the fastest-growing state for new wind-power installations last year and has 50 manufacturing facilities.
Romney says he would end the programs Obama has pursued to support solar, wind and other renewable energy manufacturers, including the wind tax credit. He has backed a renewable fuels standard, however, and has not called for an end to the tax breaks for oil and gas firms.
“Governor Romney . . . agrees with the industry’s own assessment that a boom-and-bust cycle driven by short-term incentives is not conducive to business investment and increased employment,” Romney spokeswoman Andrea Saul said. “Instead, he believes the right path forward is to create a stable and level playing field for all energy sources that encourages and rewards innovation, on which the wind industry can compete and win wherever its technology is economically viable.”
A source familiar with Romney’s tax policy, who spoke on the condition of anoymity because the race is ongoing, said the nominee “views almost everything on the table through the lens of fiscal austerity.” The tax credit — which would cost $3.3 billion to extend for another year — fails to meet the Republican nominee’s budgetary test.
Now that Congress has ended ethanol subsidies, many are making the same argument regarding wind: The industry has gained maturity, and it will still get a boost from renewable portfolio standards in 29 states and the District of Columbia that require utilities to buy a certain percentage of electricity from renewable sources.
But Obama has seized on the issue in the campaign, telling an audience in Council Bluffs, Iowa, on Aug. 13 that “without these wind energy tax credits, a whole lot of these jobs would be at risk.”
Romney’s position also has caused friction with some other Republicans: 81 percent of wind power is generated in congressional districts represented by Republicans, according to AWEA. In an interview with Radio Iowa, the state’s governor, Terry Branstad, a Republican, called Romney’s aides a “bunch of East Coast people that need to get out here in the real world to find out what’s really going on.”
The wind tax credit allows project developers or investors to reduce their tax payments by 2.2 cents for every kilowatt-hour of power generated over the first 10 years of a project’s life. That works out to about a third of the cost of an average project, though the cost per kilowatt varies widely, depending on location.
The tax credit has helped the industry expand rapidly. In the past five years, wind has made up 35 percent of new installed capacity in the United States, and more than 60 percent of the industry’s equipment is made domestically. But wind power still accounts for just 3 percent of the nation’s overall electricity, and low natural gas prices have undercut wind in some markets.
Testifying before the House Energy and Commerce subcommittee on energy and power this month, John Purcell, vice president for wind energy at Leeco Steel, said that while the wind industry has made tremendous gains, “we don’t feel like we’ve finished the job.”
“From my perspective as a steel guy, I am watching my customers laying off people all over the country, and I won’t be providing steel plates to any of them anymore,” he said.
That argument has gained some traction on Capitol Hill: Last month, the Senate Finance Committee passed a one-year extension of the tax credit, on a bipartisan vote of 19 to 5. Since the issue is likely to be resolved one way or another once Congress reconvenes in a lame-duck session after the November elections, both sides are launching major lobbying aimed at swaying House members.
AWEA has worked assiduously to court congressional Republicans, according to an internal board document the trade group prepared in November 2011 . The plan included a lobbying program focused specifically on getting House Majority Whip Kevin McCarthy (R-Calif.) to back the tax credit extension; in conjunction with Republican Hill staffers, developing a slogan based on focus groups; and co-sponsoring a series of events featuring GOP leaders with the news outlet Politico.
AWEA spent $560,000 on lobbying in the first quarter of 2012, hiring such Republican firms as the Ashcroft Group and Fierce, Isakowitz & Blalock and such Democratic ones as Elmendorf Ryan and David Gardiner & Associates.
At the same time, Exelon, a Chicago-based utility that faces stiff competition from wind, is fighting to kill the tax credit. Exelon, which generates 55 percent of its electricity from nuclear power, has backed Obama’s efforts to limit carbon emissions and promote alternatives to fossil fuels.
In a statement, Exelon spokesman Marshall Murphy said that while the company has wind power in its portfolio, it supports an end to the tax credit because it “distorts today’s competitive wholesale electric markets, causing severe financial harm to other, more reliable clean energy sources.”
The Alliance for Wise Energy Decisions, a group of conservative activists opposed to new wind projects, has brought on George David Banks, a former aide to Sen. James M. Inhofe (R-Okla.), and worked with FreedomWorks to mobilize online opposition to the tax credit through Facebook and other means. Americans for Prosperity, a group financed in part by oil magnates David H. and Charles G. Koch, also is pushing to eliminate the tax break.
Banks said in an interview that with Republican-leaning areas traditionally benefiting financially from wind, the issue has created unconventional political alliances.
“Because it’s a wealth transfer from areas of the country that don’t have wind to ones which do have wind, and have renewable mandates, this issue is more of a state-specific issue than a partisan one,” he said.
Even if the tax credit is extended, it’s unclear whether the wind industry will rebound right away. A June Congressional Research Service report noted that there has been a rush to install wind before the tax benefit expires, and “all projections reviewed for this report expect annual U.S. wind turbine demand to be less than the existing turbine manufacturing capacity — approximately 13 [gigawatts] per yea
Steven Mufson and Alice Crites contributed to this report.