Market News

 February 20, 2012
Deja Vu All Over Again: Congressional Republicans Intent on Nixing Wind, Renewable Energy Growth

 Congressional Republicans this past week scuttled an effort to extend the production tax credit (PTC) for wind energy as part of a bill that renews Pres. Obama's payroll tax cut and unemployment benefits extension.

Both Democrats and Republicans want economic growth and development---just ask any one or the other any time. It's abundantly clear that they have irreconcilable differences as to just what kind of growth is good growth, as well as how best to go about fostering it in the current economic and social environment, however.

The wind energy PTC has been a boon to a US market and industry going through youthful growing pains. It's helped attract billions of dollars of investment; helped create many thousands of good jobs in an emerging industry that's going to prove vital in the decades ahead; yielded substantial avoidance of greenhouse gas emissions, air, water and land pollution; and improved health conditions.

Clearly, Republicans won't stand for any such things. 'Socialism!,' they cry. 'Unfair subsidies!' 'It's the government deficit and huge debt that matters!' Such hyperbole and rhetoric falls flat on its can when you consider that the same "public" representatives refuse to vote similarly and eliminate subsidies many times the size and scope of the wind and renewable energy PTC.

Adding insult to injury, those longstanding federal subsidies continue to benefit one of the largest, most profitable industries of the industrial, or any other, age---oil and gas. Why such outrageous hypocrisy? Why do voters buy it?

In politics, as in movie-land murder mysteries: Cherchez la money---corporate PAC, now superPAC, and lobbying money in this case, as well as all the other perks enjoyed by our many bought-and-paid-for Congressional representatives---junkets, "business" trips, paid-for conference vacations, discrete, timely deposits to bank accounts in offshore tax havens... Who knows? The sky's the limit, ya know, in our circus merry-go-round of a political system because big corporate donors are going to get paid back many times over.

A Brief History of the Energy Production Tax Credit

The PTC for wind and renewable energy, or power, production is actually a relatively recent creation. Established by the Energy Policy Act of 1992, it's intended "to stimulate use of renewable technologies for power production by providing a production-based credit for the first ten years of project operations beginning at 1.5 cents per kilowatt-hour (kWh)," adjusted upwards for inflation in future years, explains Ryan Wiser, Mark Bolinger and Galen Barbose of the Ernest Orlando Lawrence Berkeley National Laboratory in a 2007 paper entitled, "Using the Federal Production Tax Credit to Build a Durable Market for Wind Power in the United States."

Only wind and "closed-loop" biomass were originally eligible for the PTC. Companies in the emerging solar and geothermal industries were eligible to receive an investment tax credit (ITC).

By 2007, the inflation-adjusted value of the PTC was 2 cents per kWh ($20 per megawatt-hour (MWh)), and it had been expanded to include geothermal. Hydro power, landfill gas, and municipal solid-waste-to-energy systems were made eligible for a PTC at half that rate, while non-renewable energy sources, including refined coal, Indian coal, and nuclear power are also eligible for PTCs. Solar energy was eligible for the PTC briefly, from 2004 through 2005.

The American Wind Energy Association (AWEA) summarizes the two principal federal subsidies supporting the US wind energy industry. "Under present law, the PTC provides an income tax credit of 2.2 cents/kilowatt-hour for the production of electricity from utility-scale wind turbines. The PTC is set to expire on December 31, 2012.

"Additionally, through Section 1603 of the American Recovery and Reinvestment Act of 2009, wind project developers can choose to receive a 30% investment tax credit (ITC) in place of the PTC. For projects placed in service before 2013, at which construction begins before the end of 2011, developers can elect to receive an equivalent cash payment from the Department of Treasury for the value of the 30% ITC."