Clean Power House will investigate production tax credit for wind

Published on February 14th, 2013 | by Tina Casey


Yet Another Storm Brewing Over Wind Production Tax Credit

February 14th, 2013 by  

Wow, talk about taking the wind out of a guy’s sails. Just minutes after President Obama urged the nation to support more wind power in his State of the Union address, Rep. James Lankford (R-OK) sure put a damper on things. He announced that his House subcommittee intends to challenge the new one-year extension for the production tax credit for wind power. That comes on the heels of a similar announcement last month by Rep. Darryl Issa (R-CA), who complained that the new wind tax credit extension is a “dramatic” change from previous versions.

The investigation threatens to throw yet another monkey wrench in the path of the wind industry, which is just coming off a banner year for wind production in 2012.

House will investigate production tax credit for wind

Trouble Ahead for the Wind Production Tax Credit

As Chairman of the House Oversight and Government Reform Committee’s Energy Policy, Health Care and Entitlements Subcommittee, Lankford isn’t just blowing smoke. According to our friends over at The Hill,  Lankford said that the wind production tax credit will be “the subject of increased oversight.”

That sounds pretty tame until you consider the way Issa, who chairs the House Committee on Oversight and Government Reform, framed his views on the new extension:

“In 24 hours the heavily subsidized wind industry has gone from the verge of collapse to a modern-day Gold Rush. H.R. 8 seems to create a perverse incentive to rush production of additional facilities…”

Why is This Even an Issue?

At issue, for those of you new to the subject, is a 1990’s-era temporary tax credit for wind power, which normally gets a routine extension every few years. It is intended to level the playing field between wind power and conventional energy, which has long benefited from enormous taxpayer subsidies.

Nothing being normal under Republican leadership in the House, this year the Obama Administration had to fight tooth and nail to win a one-year extension.

That would appear to be a hollow victory. Modern wind farms take at least 18 months to finish construction, and previous versions of the tax credit only applied to projects that were completed within the designated time frame.

So, why was the wind industry so happy with the new extension?

As it turns out, the new extension contains new language, making the tax credit apply to any project begun within the designated time frame, whether it’s completed or not.

That’s the sore point for Issa and Lankford, and now the game is to see how many projects they can exclude from the tax credit, by restricting the way the federal government considers that a project has actually begun.

Return of the Department of Energy

The Obama Administration hasn’t exactly been sitting on its hands while all this has been going on.

On Monday, the day before the State of the Union Address, the Energy Department released a glowing report on a wind project in Wisconsin, consisting of a single wind turbine at the Port of Milwaukee.

To highlight the interest of U.S. businesses in wind power, the Energy Department points out that ten different companies contributed to the project, which generates enough electricity to power the Port’s administrative headquarters with plenty left over to sell to the local utility.

That sounds like small potatoes, and it is. In the second phase of the one-two punch, on Tuesday morning the Energy Department released a report on Oregon’s Caithness Shepherds Flat wind farm. The massive, 845 megawatt wind farm (the equivalent of power for 260,000 homes) started up last fall and is credited with creating 400 construction jobs and 45 direct, permanent operating jobs without disrupting the ranch economy in its rural host community.

The choice of Shepherds flat was no accident, since it highlights the interest of major U.S. companies in alternative energy. In addition to federal support it was partly funded by a couple of U.S. wind power enthusiasts, namely Google and GE.

The Energy Department also took the opportunity to steal some thunder from the House investigation, stating that:

“The recent extension of the Production Tax Credit (PTC) is also helping the wind industry continue to surge forward…Now, instead of layoffs, we’re hearing stories from American wind companies that are retaining and re-hiring workers instead of moving business overseas.”

If you’re wondering what the Energy Department hopes to accomplish by posting articles on its website, the point is not so much that they expect to gin up lot more support from the general public. It’s a signal to Issa and Lankford that some heavy hitters in the private sector are betting on strong growth for the U.S. wind industry.

We’ll keep you posted.

Image: Oregon wind farm by sam_churchill

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About the Author

specializes in military and corporate sustainability, advanced technology, emerging materials, biofuels, and water and wastewater issues. Tina’s articles are reposted frequently on Reuters, Scientific American, and many other sites. Views expressed are her own. Follow her on Twitter @TinaMCasey and Google+.

  • Bob_Wallace

    Rep. James Lankford (R-OK) is taking a shot at wind?

    Oklahoma is a major wind site. There are people in Oklahoma making real money from leasing their ranch land for wind turbines. Oklahoma is selling wind electricity into Tennessee and Alabama.

    And this guy is going to screw with wind?

    Foot, meet bullet.

  • Otis11

    “In 24 hours the heavily subsidized wind industry has gone from the verge of collapse to a modern-day Gold Rush.”

    HUH??? Verge of collapse? Yes, that’s why all of Europe and China are investing heavily in wind.

    “H.R. 8 seems to create a perverse incentive to rush production of additional facilities…”

    Does this guy know the point of PRODUCTION tax credit subsidies??? The GOAL was to increase production…

    • Bob_Wallace

      Issa is a 100% anal orifice. He may be the biggest jerk in Congress.

      Wait, there’s Inhofe,

      • Trouble is, Bob, Issa and Inhofe are not alone.

        I agree with ‘JustSaying’ that, since the fossil fuel industry doesn’t get that if they would think of themselves as “energy companies” and invest in renewables, that they should be taxed to death and fined, starting at the top. Sad thing is that if they did the right thing they would come out still on top but like a monkey in a coconut trap they just can’t let go of the bait (carbon). It’s truly pathetic, but considering the damage that they are inflicting on all of us they must be stopped. Where is a “benevolent despot” when you need him? AAARRRRRGGGGGG!!!

        • Otis11

          Well, I actually had the opportunity to talk to such an Energy company a little while back – they are actually very active in doing RE R&D and are actively considering moving away from O&G towards RE if the political climate changes to make that favorable.

          The problem is, they have investors and share holders to answer to, and while they could still be profitable with RE, the amount of profit is dependent on politics, which is inherently unstable. If they do change from O&G to RE, they also have to consider the opportunity cost – say they only make a 4% profit on RE, but O&G would have made a 7% profit over the same period – investors are going to hold upper management responsible for that other 3%!

          So while they would like to pursue RE, it comes down to game theory. They are always better of doing the O&G thing unless stable policies are adopted. (For the next two decades actually – even anticipating scientific advances. RE is absolutely economical, but not the MOST profitable possible under current policies)

          • your assessment is accurate, from a money point of view. However, due to the “positive feedback loops” that present warming has unleashed we don’t have 2 decades. I’m aware that many O&G companies are researching alternatives but they continue to focus on their “primary business” which will likely kill us all. How does one weigh survival against profits?

          • Otis11

            Well, because of that it comes down to game theory. Regardless of what everyone else does, they are always better off to stay in O&G until policies change. They hope everyone else will convert to clean energy, but they see more profits staying where they are.

            Until the voting stockholders change their priorities or government policy gives them a way to justify it, they simply can’t make that change, because any Executive who did stick their neck out and push for that change would likely be fired or demoted and any changes reversed. Even the CEO answers to the stockholders…

          • The problem, as I see it, is that the value of their companies (stock) is based on the assumption that their “reserves” will actually make it to the market place. As you note, they are acting rationally from that point of view. Also, as you note, little change is likely to happen until people (stockholders in this case) wake up to the dangers or until renewables demonstrate the that they offer a better return on investment and the “market” makes the changes for them. With any serious decline in the value of their stock many “investors” will bail and move to the “new” money. Let’s hope.

          • KWL

            What dangers Kerr? Oh the ones you’ve been programmed to believe? Still and idiot!

          • Otis11

            That’s not to say that’s how I feel. I am simply presenting the facts of the matter – draw conclusions as you will.

          • Bob_Wallace

            Fossil fuel profits are being attacked. Not so much oil, for now. That will take lower priced PHEVs and longer range EVs. But coal is in deep trouble.

            That trouble is coming from two directions. The EPA is requiring cleaner emissions which means that coal plants have to spend money or pay fines. Profits drop. And the old model in which “always on” generators made little money at night but raked it in during the day due to merit order pricing is failing. Solar, even a modest amount of solar, takes away those peak hour profits.


            Natural gas is going to get hurt before long. The wells drilled in the NG drilling boom will have given up their initial high output and supply will fall closer to demand. New wells can’t be drilled and produce NG as cheaply as current wells. Gas prices will rise and take NG electricity with them. That will make wind and solar more competitive and when the wind is blowing or the Sun shining NG will get turned off. Less run time will increase the cost of NG generation (there are fixed costs).

            We’re likely to see a very large increase in end-user solar over the next few years. We’re very close to the point at which non-subsidized solar is competitive with retail electricity prices in significant parts of the country. That customer rooftop solar is going to really whack coal and natural gas. (And nuclear.)

            For energy companies it’s very much evolve or die. Some will stick with old tech for the short term profits, others will reposition themselves for the future.

          • KWL

            Edward Kerr’s an idiot!

      • Agreed.

        Those two would certainly top my list. Though, there are a few others up there who would make for some strong competition.

  • JustSaying

    I guess it is time to start a hard push to
    1) Remove oil, gas, coal tax support (all kind)
    2) Raise royality to say 33% of the highest stop market value the quarter before.
    Royality should be double for all you spill or flare.
    Under payment of royality should result in 100 time underpayment, 10% of that comes from CEO, CFO, COO upto 95% of they total comp. To help catch them, you refund 10% to the whisler blower. Would stop the shell game coal has been playing

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