Tax credit seen as vital to wind-industry growth

0 Comments | Deseret News (Salt Lake City), Jun 3, 2008 | by John Porretto Associated Press

HOUSTON -- Renewal of federal tax credits expiring at the end of the year is critical to U.S. investment in the wind-energy industry, executives and officials said Monday.

Congress is debating whether to renew, and how to pay for, production tax credits that help subsidize the growing industry. The existing subsidy of 2 cents per kilowatt hour for wind developers is set to expire in December, and the uncertainty has prompted some to delay investments beyond 2008, industry executives say.

The tax credits were a hot topic at Windpower 2008, a four-day gathering of more than 10,000 policymakers and energy professionals that began Sunday.

Vic Abate, vice president for renewables at GE Energy, an arm of General Electric Co., said failure to renew the tax credit will almost certainly slow GE's business of supplying turbines to wind farms.

"We're already starting to see some customers ask, 'If this (credit) doesn't happen, can we put these in Canada or South America?'" Abate said.

The credits expired in 1999, 2001 and 2003, and wind-power installation fell significantly in each of the following years, advocates of the tax credits note.

Despite the subsidy question, legendary oilman T. Boone Pickens' Mesa Power said last month it ordered 667 wind turbines from GE for a mammoth wind farm in the Texas Panhandle -- a $2 billion bet on what Pickens hopes will become "the wind capital of the world." The entire project, whose cost could grow to $12 billion, is forecast to be finished in 2014.

Pickens acknowledged that questions over the subsidy made the GE order a bit harrowing, but he said he's confident Congress will understand the consequences if it doesn't OK the credit.

Based on a price of $125 a barrel for crude oil, Pickens estimates the United States will spend $700 billion a year for foreign oil -- a tab he said is not sustainable.

"People may say I'm foolish to have that kind of confidence in Congress, but I do because the $700 billion is so overwhelming," he told The Associated Press. "We're going to have to go to all the alternatives that we can."

Wind energy today accounts for about 1 percent of the nation's electricity, but the industry has been on a growth spurt. More than $9 billion in investments helped U.S. wind capacity grow by 45 percent last year, and 2008 is poised to match those levels, according to the American Wind Energy Association.

A report released last month -- a collaboration between the Energy Department and industry -- concluded wind energy could generate 20 percent of the nation's electricity by 2030, about the same share now produced by nuclear reactors.

Andy Karsner, the Energy Department's assistant secretary for efficiency and renewable energy, said Monday that Congress should look beyond the current tax-credit subsidy and create a policy that encourages investment in a variety of clean-energy industries. Ideally, he said, it would be a "technology neutral" policy that helps reduce greenhouse-gas emissions growth regardless of the source -- wind, nuclear, solar, or some other.

For now, however, he said it's important for Congress to renew the tax credit.

"This is the tool we've got in the tool kit," Karsner said. "Playing with it right now is not the answer."

Hunter Armistead, who helps oversee wind-farm projects for developer Babcock & Brown Ltd., agreed a policy that extends beyond two years was far more desirable for the industry.

"We see it as a bridge to something more permanent," Armistead said. "For now, though, it's what we've got."