The wind industry set records in 2012, seeing some 25 billion dollars’ worth of investment and an increase of more than 13,100 megawatts nationally. Credit: Bigstock

By Carey L. Biron
WASHINGTON, Dec 17 2013 (IPS)

The U.S. wind industry looks set to enter a period of uncertainty, with an important government subsidy expiring at the end of the month and no clear plan for lawmakers to work towards an extension.

Because of the way the subsidy, known as the wind production tax credit (PTC), was extended in January this year, the industry has an extra cushion of time before the effects of the expiration would be felt directly. While this has muted some of the urgency around the issue, trade groups say inaction by Congress will become increasingly problematic during the coming year and are urging lawmakers to put in place policies that will offer longer-term stability.“The short-term expirations of the PTC have clearly wreaked havoc on the industry, creating a boom-bust cycle.” -- Steve Clemmer

“The change made in 2013 allows projects that start construction this year to qualify for the PTC … and will allow companies to continue to build projects past 2013,” Rob Gramlich, senior vice-president of public policy at the American Wind Energy Association (AWEA), the country’s largest such trade group, told IPS. “Meanwhile, our industry still faces uncertainty in the medium and long term, and needs Congress to address that next year.”

Since the PTC’s creation in 1992, Congress has often extended it only at – or even after – the last minute. Indeed, the reason for January’s tweaks to the current extension’s timeframe was due to the very late agreement, with proponents worried otherwise that no new wind projects would get built given that such a project typically takes upwards of two years.

Yet currently there are two obstacles to a typical extension for the PTC. First, in the current climate of fiscal austerity, federal government spending generally needs to be offset by savings elsewhere, thus requiring time-consuming haggling.

Second, the Congressional committee that would oversee energy credit “extenders” has announced plans to try to negotiate a complete overhaul of the U.S. tax system. While this would be lauded, it will be a dauntingly complex undertaking with no guarantee of success.

That leaves the PTC, and the broader wind industry’s health in the United States, hanging in the balance.

“We continue to see evidence that the Production Tax Credit is an effective tool that is working,” AWEA’s Gramlich says. “The legislative vehicle [for extension] could be tax reform, an extenders package, or something else, but ultimately our industry will begin to feel the impacts of uncertainty in 2014.”

Record year

The PTC, which offers a tax subsidy worth 2.2 cents per kilowatt-hour of wind energy produced for the first decade of a project’s lifetime, has been credited with substantially strengthening the role of wind energy in the United States. This has also resulted in a critical lowering in the price of production, which has come down by around 40 percent over the past four years.

The industry set records in 2012, seeing some 25 billion dollars’ worth of investment and an increase of more than 13,100 megawatts nationally. Combined with a somewhat slower year for the global wind energy leader, China, this put the United States essentially tied for the top spot internationally.

Yet the ongoing importance of the PTC – and the overall tenuousness of the domestic wind market – can be gauged by what happened next. Even though Congress only missed its deadline by a day or two in extending the PTC in January, it took much of the subsequent year for the industry to recover from the uncertainty this created for investors and utilities.

During the first six months of the year, AWEA reports just one wind turbine was constructed in the United States. Since then manufacturing and installations has again picked up as the impact of the new PTC assurances has been felt, and the extension’s tweaked timeframe means that this renewed momentum will last into next year.

Beyond that, however, the policy future is notably unclear. According to a new long-term forecast released Monday by the U.S. Energy Information Administration (EIA), U.S. wind energy production will increase through 2015 but then see no major rise for almost two decades.

Such an analysis appears to capture the increased production capacity from the current PTC extension, but then offer a bleak assessment of what would happen if the credit were not extended any further. (EIA estimates are based only on current legislation.)

In fact, despite ongoing, polarised debate here over taxpayer assistance in nurturing nascent alternative energy markets, there remains surprisingly bipartisan support for the PTC. To a great extent, this is because many parts of the United States best suited to wind energy generation are in Republican strongholds, thus offering enticing local boosts in jobs creation and investment.

Last month, a bipartisan group of 11 state governors wrote a letter to Congressional leaders, warning that some 5,000 people lost their jobs last year due to anticipation over whether lawmakers would extend the PTC.

“Congressionally sanctioned uncertainty has hit the nation’s wind industry incredibly hard,” the letter warns.

“We respectfully urge you not to repeat the legislative brinksmanship of 2012 and to adopt a responsible multi-year extension of the production tax credit … The nation’s wind industry developers do not need this tax credit forever, but they do need policy certainty in the near term to bring their costs to a fully competitive level.”

End all subsidies?

Indeed, many proponents of a longer-term extension of the PTC are not actually urging indefinite support for the industry, but rather any policy that can allow for long-term strategising.

“The short-term expirations of the PTC have clearly wreaked havoc on the industry, creating a boom-bust cycle,” Steve Clemmer, director of energy research at the Union of Concerned Scientists, an advocacy group, told IPS. “The industry definitely needs a long-term policy, whether that’s a long-term extension or phase-down or a transition to another policy.”

Clemmer notes that part of the reason the PTC and similar credits for renewable energy production were adopted in the first place was to level the playing field with other, more established, energy technologies. While that dynamic remains largely unchanged today, the new discussion on tax policy offers a potent opportunity.

“Fossil fuels and nuclear power have been getting much larger subsidies for much longer than renewables receive, around 10 times as much on an annual basis if you look back 50 years or so,” Clemmer says.

“To eliminate the subsidy for wind without addressing the others would be unfair. But that also gets you back to the current discussion over comprehensive tax reform – perhaps we can simply phase out all of these subsides at the same time?”

U.S. offshore wind has lagged far behind the country’s onshore wind sector. Credit: Bigstock

By Carey L. Biron
WASHINGTON, Jun 4 2013 (IPS)

The U.S. government announced Tuesday that it would be going forward with long-discussed plans to auction federal leases off the Atlantic Ocean coast for the development of offshore wind energy.

The sales, to take place in late July, will be the first time that federal lands have been offered on a competitive basis for the United States’ nascent offshore wind business. Proponents say the industry has significant potential, but for decades it has lagged far behind the country’s onshore wind sector – even as offshore usage has strengthened significantly in other countries."Developing this industry will help to create thousands of new jobs." -- Chris Long of the American Wind Energy Association

“Today’s announcement is an important milestone in efforts to launch the offshore wind industry in the United States,” Chris Long, manager of offshore wind and siting policy for the American Wind Energy Association, a trade group, told IPS. “Offshore wind energy represents a significant opportunity for our country, and developing this industry will help to create thousands of new jobs.”

Currently, the Interior Department has approved nine companies to take part in the auction, which will offer around 165,000 acres in two blocks off the coast of the eastern states of Massachusetts and Rhode Island. A third area off the coast of Virginia could be offered for lease later this year.

According to recent analysis by the Department of Energy’s National Renewable Energy Laboratory, the initial two blocks will be able to produce a regular supply of around 3,500 megawatts, enough to power around a million U.S. homes.

Overall, the United States is thought to have around 4,000 gigawatts (or four million megawatts) of offshore wind potential. That’s almost four times the country’s current electricity production of all types.

“This leasing announcement is a big deal, a significant move forward on what has been an extensive process to identify appropriate sites and give access to try to build in the water,” Dave Hamilton, the director for clean energy with the Sierra Club, a conservation group, told IPS.

“These are important steps, but now getting equipment in the water, finding communities or entities to buy the power at the price producers can make it – that’s all still ahead of this project.”

Proponents have long noted that offshore wind has particular potential in the United States given that almost four-fifths of the electricity requirement comes from states along the coasts and Great Lakes, and thus windfarms could be positioned fairly near demand centres.

According to estimates in a recent scientific paper, around a third of all U.S. power demand – or all demand from the East Coast, except during summer – can be satisfied from offshore wind power along the East Coast alone.

Strengthened by government subsidies, the U.S. wind energy sector has grown significantly – albeit belatedly – in recent years, currently comprising some three percent of the country’s overall power mix. Meanwhile, the offshore sector has lagged far behind, in part due to the significantly higher costs and technicality associated with installing a turbine on water.

The technology has long existed, however, and many models have already gone through a lengthy process of testing. Just last week, the Energy Department formally announced that a new prototype, a floating turbine in Maine, has been connected to the national electricity grid, the first offshore turbine now operating in the country and the first of seven such experimental projects currently underway.

The U.S. government has green-lighted at least two smaller East Coast offshore wind projects, but these went forward without a competitive bidding process and are still awaiting regulatory approval. While around a dozen privately financed offshore projects are currently being developed, July’s leasing is being touted as the full opening-up of the new industry to the private sector.

“If there is good interest in this one, then I think you will have this happening on a consistent basis,” Sally Jewell, the secretary of the interior, told reporters Monday.

“I can’t promise that they will be in production in four years, but we don’t want to be a roadblock. The market will dictate, but we certainly don’t want to get in the way.”

‘Picking energy winners’

The United States has been falling behind on offshore wind innovation since the early 1990s, when Denmark opened the world’s first offshore wind farm. By today, countries across Europe have constructed some 4,000 megawatts of offshore capacity – a number that is expected to increase to a whopping 40,000 megawatts by 2020, according to 2011 estimates.

China, too, has been moving quickly into all types of wind energy production. Beijing has published plans to expand the country’s still burgeoning offshore sector to 30,000 megawatts by 2020.

Yet when President Barack Obama approved the country’s first offshore power project, in 2010, he came under fire from conservatives, some environmentalists and others concerned about the “aesthetic” impact of the project, including powerful Massachusetts lawmakers.

Yet Tuesday, Ed Markey, the top Democrat on the House Natural Resources Committee and currently a top contender to become a Massachusetts senator, praised the new project.

“Offshore wind is a win for American jobs, for American energy security, and for our environment, and it will start off the coast of New England,” Markey said Tuesday in a statement. “I commend the Interior Department for … conducting these lease sales in a way that will ensure leases go to companies that are serious about developing new wind energy.”

In deciding on leases, the government will reportedly take into account whether bidding companies already have agreements in place with utility companies that can purchase the power.

Meanwhile, renewable energy in recent years has become almost inexplicably politicised in the United States, particularly here in Washington. Already, Republican members of Congress have expressed scepticism over the new plan for offshore leasing.

On Tuesday, several conservatives highlighted the perceived discrepancy between President Obama’s advocacy for offshore wind and his hesitancy regarding plans for offshore oil drilling. They also accused him of intervening in the market and “picking energy industry winners and losers”.

“Opponents of offshore wind projects have taken on some very unusual tactics for people who claim to support economic development and diversified energy options,” the Sierra Club’s Hamilton says.

He notes that two highly visible funders of conservative causes, oil refinery magnates Charles and David Koch, have been actively opposed to the development of offshore wind production capacity.

One key focus of this pressure could be on members of Congress, who by the end of the year must decide whether to renew a subsidy – known as the federal investment tax credit – considered key for the offshore industry’s attempts to get off the ground.