Iowa: Tax break, energy jobs twist in wind
These wind turbines are in the Cerro Gordo County Wind Energy Farm south of Ventura.
DES MOINES | Tax breaks for wind-power producers are set to expire in a little more than a month, threatening hundreds of manufacturing and energy jobs in the state if nothing is done.
In Iowa, much of the attention has focused on the federal Renewable Fuel Standard in which the federal government guarantees a market for biofuels. But for Iowa’s turbine manufacturers and power companies, it’s the federal production tax credit that is the center of concern.
Iowa gets nearly a quarter of its power from wind energy, a higher percentage than any other state in the nation. It’s on track to get as much as 50 percent of its power from the wind when a 448-turbine, $1.9 billion MidAmerican Energy project is completed in 2015 and the cross-state Rock Island Clean Line project to deliver the energy is done in 2017, said Harold Prior, executive director of the Iowa Wind Energy Association.
“Not all of that energy would be used in-state; much of it would be for export,” Prior said. “But that’s the type of investment we’re seeing.”
Fueling that investment is the federal production tax credit, which rebates energy producers 2.3 cents per kilowatt-hour for investment in certain types of renewable fuels for 10 years.
Congress passed a one-year extension in 2012. The extension allows the rebate for projects that meet certain construction completion standards even if the projects aren’t completed until later, so the MidAmerican project is expected to qualify even though all the turbines aren’t expected to be up and running until sometime in 2015.
The extension was the result of an intense round of lobbying by wind interests and lawmakers from states, including Iowa and Texas, that have comparatively robust wind-energy industries.
But some in Congress see the tax credit as propping up an industry that should be standing on its own now.
“We are writing to urge you to allow the wind production tax credit to expire at the end of 2013,” begins a letter U.S. Rep. Mike Pompeo, R-Kan., written to the chairman of the House Ways and Means Committee earlier this month. The letter was signed by 52 of his colleagues — Republicans and Democrats — including some from Texas, Illinois and Colorado.
“The growth in wind is driven not by market demand,” Pompeo continues in the letter, “but by a combination of state renewable portfolio standards and a tax credit that is now more valuable than the price of electricity the plants actually generate.”
A renewable portfolio standard is a requirement that a certain percentage of energy consumed in the state is produced from renewable sources. Gov. Terry Branstad made Iowa the first state to require wind energy as part of its portfolio during the farm crisis in the 1980s.
Iowa’s U.S. Sen. Charles Grassley is known as the “father of the wind tax credit,” having sponsored the first-ever provision enacted in 1992, and he is working to expand it as chairman of the Senate Finance Committee.
He said that because the wind tax was extended as part of a deal that extended other tax credits, it should be safe.
“I don’t think you’re going to separate out any one of the extenders. Cellulosic ethanol is one, biodiesel is another one, then you got the wind energy, and then there’s 47 others,” he said. “I think they all go together, and if we can’t get something done by the end of the year, we’ll go into next year and make it retroactive, just like we have in the past.”
But David Swenson, an economist at Iowa State University, isn’t so sure. He said a move to do away with subsidies generally, and the lower cost of electricity thanks to increased natural gas production, specifically, is trouble for subsidized energy programs.
“We have a long-term unwinding of subsidies in the U.S.,” Swenson said. “We are trimming SNAP (food stamps), we are moving away from direct payments to farmers, earmarks are a thing of the past, and a wide range of industrial benefits have been whittled down. Natural gas has totally changed the economics of energy and policy attitudes. That factor is affecting a very wide range of activities and will continue to over the next decade at least.”
Prior, the wind-energy lobbyist, said that if Congress kills the wind tax credit, “they’re getting into the business of picking winners and losers, which is what they all say they don’t want to do.”
He estimates the wind-energy industry is Iowa accounts for 3,000 jobs worth a combined payroll upward of $70 million a year, and landowners make roughly $12.6 million a year in lease payments hosting turbines on their land.
“These things do make a difference,” Branstad said. “Whether it’s the (Renewable Fuel Standard) or the wind tax credit, we lobbied hard for that extension, and now we have MidAmerican investing $1.9 billion in a new wind farm. It’s a good thing for the environment, it’s a good thing for jobs, and it provides additional income for farmers, too, who have turbines on their land.”