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Wind power faces tax credit uncertainty
Uncertainty over the U.S. wind tax credit, set to expire at the end of this year, is taking its toll on the country’s wind power industry.
The tax credit, in existence since 1992, allows project developers or investors to trim tax payments 2.2 cents for every kilowatt-hour of power generated over the first 10 years of a project’s life.
“It’s hard to make those new investments in bringing down costs when you don’t know what the world will look like a hundred days from now,” Liz Salerno, chief economist for the American Wind Energy Association told The Washington Post.
To be eligible for the credit, wind farms must begin operating by this year, so developers have been scurrying to finish wind farms. A June report from the Congressional Research Service notes that while there’s been a rush to install wind power for the tax benefit expires, “all projections reviewed for this report expect annual U.S. wind turbine demand to be less than the existing turbine manufacturing capacity — approximately 13 (gigawatts) per year.”
Meantime, wind manufacturers and their suppliers have begun shedding jobs and scaling back operations in response to the possible subsidy withdrawal.
In recent months, American companies in the wind sector have announced almost 1,700 layoffs, reports The New York Times.
Siemens announced this week that it would cut more than 600 wind power jobs in the United States, attributing the decision to regulatory uncertainty regarding the future of the wind tax credits.
“Following the rapid ramp-up of the wind power industry over the past five years, the industry is facing a significant drop in new orders and this has an unfortunate consequence on employment in this segment of the power industry,” Siemens said in a the Financial Times report.
Siemens’ move follows wind tower maker Katana Summit’s announcement earlier this month that it would close plants in Nebraska and Washington if it couldn’t find a buyer, cutting nearly 300 jobs.
And Denmark’s turbine manufacturer Vestas is shutting a research and development facility in Houston that opened only three years ago and once employed 75 people.
AWEA warns that 37,000 more jobs will be lost if the tax credit isn’t renewed. About 85,000 people were employed in the wind sector during its peak in 2008 and 2009, the association says.
Critics of the tax argue that the wind sector has had enough time to wean itself from the subsidy and taxpayers’ investment has yielded an inadequate return because wind represents a small share of total electricity generation.
“Big Wind has had extension after extension after extension,” says Benjamin Cole, a spokesman for the American Energy Alliance, a group financed in part by oil interests that has been lobbying against the credit in Washington, the Financial Times reports. “The government shouldn’t be continuing to prop up industries that never seem to be able to get off their training wheels.”
Copyright 2012 by United Press International