Federal support for wind power will last for at least one more year under a little-noticed portion of the “fiscal cliff” deal reached earlier this week.
It largely was overshadowed by the back-and-forth over tax rates and other, higher-profile issues, but the wind-energy industry was bracing itself for mass layoffs in the event the $12 billion-per-year production tax credit and other giveaways were eliminated at the end of 2012, as originally scheduled.
In the end, the sector’s government support will continue for the next 12 months, though it will continue to be a bone of contention among conservatives who want to see it end.
While the one-year extension doesn’t provide the same certainty enjoyed by the solar-power sector — which has its tax credits guaranteed through 2016 — the agreement saves about 37,000 jobs and keeps wind turbine and related factories open, the industry argues.
“This is long-awaited good news for the wind industry that will help put furloughed workers back on the job and rev up production in wind-industry manufacturing facilities,” said David Foster, executive director of the BlueGreen Alliance, a coalition of labor unions and environmental groups. “Americans overwhelmingly support investing in sources of renewable energy such as wind, which is why we need a longer-term extension of these tax credits.”
But critics called it a prime example of wasteful spending by a government determined to pick winners and losers in the marketplace.
“As the extension gets the industry through ‘another year,’… they’ll be right back at the bargaining table when the credit expires, adamantly pushing for another extension,” said Heritage Foundation analysts Nicholas Loris and Katie Tubb in an analysis of the the fiscal cliff deal.
The wind credit was one of many jammed into the fiscal cliff deal, at a cost of billions of dollars to taxpayers. Puerto Rican rum makers, Hollywood filmmakers and production studios, motorcycle manufacturers, restaurants and many other businesses will benefit from the wide variety of tax credits, exemptions and breaks crammed into the last-minute agreement.
For wind-power advocates, a longer-term extension of the tax credit is by no means certain. Republicans in the House and Senate continue to maintain that such strong federal support for wind, solar and other “green” sources — a hallmark of the Obama administration’s energy policy — distorts the market rather than requiring industries to stand on their own two feet.
Wind-power supporters boast of the great progress made in the sector in recent years; indeed, despite the uncertainty of the tax credit’s future, the industry had one of its best years ever in 2012. About 44 percent of all new electricity generation installed last year came in the form of wind turbines, according to the American Wind Energy Association.
Natural gas, by comparison, fueled only 30 percent of the generation installed last year, while coal was responsible for even less as White House environmental policies have made it virtually impossible to build a new coal-fired power plant.
But wind’s recent track record, critics argue, would look far different were it not for the tax credits and other benefits that make projects cost-effective and ultimately profitable.
“This subsidy should not be extended, first, because a government that borrows 42 cents of every dollar can’t afford it,” Sen. Lamar Alexander, Tennessee Republican, argued in a recent piece for National Journal.
“Such large subsidies distort the marketplace, making coal and nuclear uncompetitive let the marketplace decide which fuels can produce enough clean, cheap, reliable energy,” he said.
Apart from the politics, the short-term nature of lawmakers’ approach to the wind industry has left it in a constant state of limbo.