Despite their frustration with Congress, some farmers are relieved, but not because of the money they make on their crops. In part of the fiscal cliff deal, Congress extended a tax credit that benefits the wind energy industry. And that is today’s bottom-line in business. The landscapes of Midwestern farm states have changed dramatically, due to wind power. As NPR’s Sonari Glinton reports, wind has also changed the landscape economically and politically.
In the last-minute tax maneuvering in Congress this week, wind power came out well. Wind not only got an extension of its tax credit in the federal budget compromise, but the rules were also restructured: while the extension runs for only one year, the nature of the deadline has changed. Projects do not need to be finished and feeding electricity to the grid by next New Year’s Eve; construction only needs to be started.
A one year extension of the U.S. tax credit for wind power, part of the budget compromise Congress passed Tuesday, will save as many as 37,000 jobs in an industry that is expected to stall this year, the American Wind Energy Association estimates. The production tax credit was due to expire at the end of 2012. It will cover all wind projects that start construction in 2013.
The one-year extension to the wind production tax credit delivers a big win for the industry that had made winning a PTC lifeline its top priority. The broad fiscal cliff deal included language extending the PTC deadline through the end of this year and modifying its requirements to allow projects to be eligible for the credit as long as construction begins by the deadline — a change that also benefits geothermal, hydropower, biomass and waste-to-energy developers that can claim the credit. The new language means, in effect, that wind developers have more certainty as they plan projects that would go into service over the next two years, because of the planning horizon inherent in such projects. Before the change, projects had to be “in service” and sending electricity to the grid before developers could claim the credit.
While the eleventh-hour PTC extension will help keep the wind energy industry afloat, it did not ameliorate damage already done to an industry where investment activity shrank from robust levels at the end of 2011 to a near standstill by early December, when hopes for a stand-alone extension in the increasingly fractious Congress were nearly extinguished. In the ensuing months, dozens of wind power companies, including turbine, blade and tower manufacturers, scaled back or even shuttered operations in the United States in anticipation of the expiring tax credit. Vestas, the world’s largest turbine manufacturer, said yesterday that it expected a significant dropoff in wind turbine installations in 2013, even with the PTC extension. However, the industry will be stronger than it would have been if Congress had let the subsidy expire, the Danish company said.
Bledsoe noted that Sens. Ron Wyden (D-Ore.) and Lisa Murkowski (R-Alaska), who will be leading the Senate Energy and Natural Resources Committee in the 113th Congress, have repeatedly stressed their close personal friendship and their desire to make the next Congress a productive one on the panel. “There’s every reason to believe that an energy bill can move forward,” at least in the Senate, he said. “It strikes me that a package that included increased access to domestic oil and gas reserves in tandem with more robust energy efficiency standards could strike the right balance to gain broad bipartisan support in both chambers because both of those measures are good for the economy. A Wyden aide said the incoming energy chairman hopes for some successes in the new Congress.
“Senator Wyden isn’t going to give up trying to advance better policies, including overhauling energy incentives,” Wyden spokesman Keith Chu said in an email. “Given that those incentives were once again extended in piecemeal, short-term fashion, it’s even more important that Congress work on a permanent solution, to replace the boom-and-bust cycles and uncertainty that have plagued the energy sector.”
Vestas Wind Systems A/S (VWS), the biggest wind-turbine maker, led gains among European peers as the U.S. Congress approved a law extending a tax credit for the industry. Shares in Aarhus, Denmark-based Vestas surged as much as 13 percent, the most in five weeks, and were up 7.8 percent at 34.35 kroner as of 10:52 a.m. in Copenhagen. Nordex SE (NDX1) rose 3.3 percent and Gamesa Corp. Tecnologica SA (GAM) jumped 7.2 percent. The U.S. House late yesterday passed a bill averting spending cuts and tax gains that had threatened an economic recovery. The law, already approved by the Senate, includes an extension of the Production Tax Credit, which pays wind-farm owners 2.2 cents for every kilowatt-hour of power they produce.
“Overall, this is very, very good news for the wind industry and I think it will help us out,” said Harold Prior of Milford, executive director of the Iowa Wind Energy Association. Because projects begun this year will be eligible for the tax credit, the Senate’s provisions are basically a two-year extension because the work can be completed in 2014, he added. “But the industry needs more certainty than a one- or two-year extension,” Prior said. “Pretty much 2013’s developments are lost right now because of the lead time needed to manufacture the major components. Also, the manufacturers of major components need a better surety of what the government subsidies are going to be before they invest millions in manufacturing these large components.
Congress has included the long-sought extension of wind energy tax credits in final passage of a bill to avert the “fiscal cliff” that now moves to President Obama for his expected signature. America’s 75,000 workers in wind energy are celebrating tonight over the continuation of policies expected to save up to 37,000 jobs and create far more over time, and to revive business at nearly 500 manufacturing facilities across the country. The extension of the wind energy Production Tax Credit (PTC), and Investment Tax Credits for community and offshore projects, will allow continued growth of the energy source that installed the most new electrical generating capacity in America last year, with factories or wind farms in all 50 states.
A tax credit that provides incentives to produce wind energy, a financial lifeline for the wind power industry, will likely be extended if Congress approves a tentative deal between Senate Democrats and Republicans to avert the “fiscal cliff.” President Barack Obama said on Monday that a deal with Congress to stop a range of spending cuts and tax increases was “within sight,” although not yet finalized.