Congress not acting on wind turbine credits despite job fears
By David Pitt
DES MOINES, Iowa — There is little optimism Congress will act quickly to extend a federal energy tax credit for building wind turbines, despite the likelihood that letting the program expire could lead to the loss of thousands of jobs.
The issue is important in Iowa, where 20 percent of electricity is generated by wind turbines and the state ranks second behind only Texas for installed wind capacity. An estimated 7,000 workers in Iowa are employed in more than 250 businesses associated with the wind industry.
Extension of the tax credit is caught up in deep differences over spending in Congress, where fiscal conservatives in the Republican Party are fighting renewal even as other GOP members push to have the program continued. The issue also has spilled into the presidential race, with Democratic President Barack Obama supporting the credit and Republican Mitt Romney opposing it, angering Iowa Republican Sen. Chuck Grassley and Gov. Terry Branstad.
Grassley said at a forum in Burlington in August that Romney’s stance “was just like a knife in my back.”
Branstad spokesman Tim Albrecht said that the governor supports extending the tax credit and that he has spoken with Romney’s policy advisers on the issue. Albrecht said the conversations were private and he declined to elaborate.
Grassley, the author of the original tax credit in 1992, introduced a bill that would extend it for a year. Grassley said he fought to get wind energy reinserted in a Senate bill after it had been removed. The wind tax credit is among 50 or 60 other tax extensions in the bill.
“The wind-energy production tax credit is designed to level the playing field for this renewable resource against coal-fired and nuclear electricity generation,” he said.
The Senate Finance Committee approved a bill, but Grassley doubts the measure will come up for a vote before the November election. He wants a Senate vote later in November or December, but its fate in the Republican-controlled House is uncertain.
The policy uncertainty already has caused job cuts as wind energy producers delay new projects until it’s clear whether the credits will be renewed.
The American Wind Energy Association, a trade group, has estimated that as many as 27,000 jobs could be lost next year if the credit expires, about 3,000 in Iowa.
Katana Summit, a Columbus, Neb.-based wind tower manufacturer, will close plants in Columbus and Washington around Nov. 1, laying off almost 300 workers, said CEO Kevin Strudthoff, who blamed his company’s problems on uncertainty about tax credits.
“Business has completely fallen off. Developers are not placing orders until they know what happens with the policy,” he said.
It’s frustrating that politics is hurting an industry that is bringing production into the United States from other countries, creating new jobs for U.S workers, Strudthoff said.
Up until a few years ago, most wind turbines were made in Europe. However, production in the United States has expanded rapidly. More than 470 manufacturing facilities are operating, up from 30 in 2004.
Making the blades, turbines, towers, and other equipment in the U.S. has brought down their cost, and taller towers and larger blades are making wind-generated electricity more efficient.
Harold Prior, executive director of the Iowa Wind Energy Association, said the industry would accept a phase-out of the tax credit after an extension of four to five more years. By then, innovations in the technology are expected to lower the cost of producing wind energy enough to make it competitive with other forms of electricity generation including natural-gas fired power plants.
The production tax credit provides an income tax credit of 2.2 cents per kilowatt-hour for the first 10 years of electricity production from large-scale wind turbines.
The credit expired in 1999, 2001, and 2003 and always was renewed, but each time it expired jobs plummeted as energy producers held off on planned projects. It was most recently renewed in the economic stimulus bill signed by President Barack Obama in February 2009.
Renewing the tax credit is no small burden to the federal budget. The current proposal would result in a loss of estimated $12 billion in tax revenue over 10 years.
That why U.S. Sen. Ron Johnson, R-Wis., opposes the wind energy credit.
“The federal government should not be providing an incentive to products that can’t make it on their own in the marketplace,” according to a statement attributed to Johnson.
Johnson has signed onto a bill that would end all energy tax subsidies.
Wind isn’t the only energy source given such tax breaks.
A U.S. Energy Information Administration report released last year showed the federal government in 2010 handed out more than $37 billion in energy subsidies.
The wind incentives cost the government $4.99 billion while support for traditional oil and natural gas was $2.82 billion. The report notes that billions of dollars of additional benefits permanently written into the tax code go to oil and gas producers and are not included in the figures.
Federal support for nuclear energy production was $2.5 billion. Biofuels including ethanol and biodiesel received $6.64 billion in subsidies.
Since the wind tax was enacted in 1992 almost 3,000 wind turbines have been installed in Iowa on more than 100 wind farms. The farmers who own the land on which the turbines are built are paid more than $11 million a year.
Newton, a town of 15,000, was resurrected by wind energy related jobs. Its largest employer, Maytag, was bought in 2006 by rival Whirlpool, which closed the corporate headquarters and factories idling about 4,000 workers. Since then a wind turbine blade manufacturer and a wind turbine tower maker have started production. They’ve hired nearly 1,200 workers and boosted the taxable valuation of property by 19 percent, Mayor Chaz Allen said.
“For us, it is about jobs,” Allen said. “We’ve been able to produce about half of the manufacturing jobs we’ve lost through wind.”
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