A scramble for waning tax incentives as Congress mulls overhauling them
Denmark-based Vestas, whose U.S. operation includes large turbine, blade and tower manufacturing plants in Colorado, said it would supply 75 2 MW turbines to EGP’s $250 million Origin wind farm in Oklahoma, which is set to begin producing power by the end of 2014.
In addition, EGP — an Italian multinational firm with energy projects in 16 countries, including wind, solar and geothermal projects in the United States and Canada — agreed to purchase 200 MW of additional wind turbine capacity from Vestas over the near term, with an additional 636 MW expected to come later.
The Vestas-EGP agreement was the second major wind power business deal announced this week, following Monday’s announcement by Siemens AG that it would supply 448 turbines from its Iowa and Kansas manufacturing plants to meet a 1,050 MW wind energy expansion by Iowa-based MidAmerican Energy Co. That agreement was touted as the largest purchase agreement ever signed for an onshore wind development (ClimateWire, Dec. 17).
The timing of the two agreements, coming with only a few days left in the 2013 congressional calendar, is not coincidental. Wind energy developers are scrambling to move projects from the drawing board into the construction pipeline in order to be eligible for a 2.3-cent-per-kilowatt-hour production tax credit that is set to expire Dec. 31.
The tax credit, or PTC, is considered by the wind energy industry to be a key driver of investment in wind farms across the country, including a record-breaking 13,000 MW of new wind energy capacity added in 2012. Yet the PTC’s fate has been tied to the political machinations of Congress, where it has struggled to gain sufficient support in recent years to be given long-term life. Its last 12-month extension came in January as part of a last-minute deal to avert a federal financial crisis.
Earlier this week, a group of mostly Republican senators issued a letter calling for Congress to allow the PTC for wind energy to expire, noting that the current PTC provision provides for a phaseout period allowing developers an additional 24 months to place wind farms in service (E&ENews PM, Dec. 17). The PTC critics, including Democratic Sen. Joe Manchin of West Virginia, further argue that the PTC is now promoting a “mature technology” that should be allowed to succeed or fail on its own terms.
Supporters of wind energy tax credits say the industry could survive without the PTC, but only if other forms of energy — including fossil fuels — are similarly stripped of taxpayer subsidies and other benefits.
With hopes of striking a middle-ground solution, Senate Finance Chairman Max Baucus (D-Mont.) yesterday rolled out a new “technology neutral” proposal that would effectively end most federal energy tax credits for specific industries like wind, solar or biofuels.
Instead, the government would offer incentives for any and all energy sources that can operate with high efficiencies and emit few or zero greenhouse gas emissions (Greenwire, Dec. 18).
For the electric power sector, the legislation proposes that any generation unit whose emissions rate is 25 percent below the U.S. electricity sector average would be eligible for a production or investment tax credit.
A zero-emissions facility like a wind farm or solar array, or even a nuclear plant, could reap an annual production tax credit of 2.3 cents per kWh for 10 years or a single investment tax credit equaling 20 percent of a facility’s construction costs. Facilities and technologies with slightly higher emission rates would see smaller tax credits, according to the bill.
The American Wind Energy Association responded positively to the Baucus proposal, noting that it is consistent with a long tradition of providing government incentives to promote domestic energy, including clean energy resources such as wind power.
“Wind energy has already proven that it can deliver in these areas and it must continue to be a critical part of the U.S. energy mix,” Rob Gramlich, AWEA’s senior vice president for public policy, said in a statement.