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Expiring tax credits for renewables blow an ill wind
Over the last decade, new wind farms have changed America’s landscapes – and its power sources. The growth has been spurred by a production tax credit wind companies get in exchange for producing energy. But the credit is due to expire at the end of the year if Congress doesn’t renew it.
The wind industry is preparing for a big hit. Recently, 28 governors and the president lobbied the Congress for an extension to the production tax credits, or PTCs, for wind.
Gerry Miller’s 300-acre backyard in Clinton is mostly wetlands – except for a giant wind turbine that went up about a week ago. It’s less than a mile from the Canadian border and stands 492 feet tall.
Miller invites me to take a look. We climb up a ladder and into the turbine. On the day of my visit, the company’s installing an elevator that goes all the way to the top. We’re standing inside this huge echo-y cylinder, where the ceiling is a long way up.
Impressive, but Miller says having the turbine on his property hasn’t been such a big deal.
"I’d say it benefits everybody in the town because it really lowered the town tax rate," he explained.
Seventy new turbines have just gone up in Marble River. The project expects to be producing energy well before January 1.
Gerry says that as long as the turbine is up and running, he gets paid around $15,000 a year by EDP Renewables, the company that owns Marble River. I couldn’t confirm that amount because of the company’s confidentiality policy. But it sure seems like a lot of money in Clinton, where the median household income is less than $30,000.
"Like in this town we’re losing everything ya know," Gerry said sadly. "My gosh, the church, the priest we had died and now its closed and now the Canadian custom that closed about a year and a half ago — at one time there used to be businesses here — and that’s all gone."
Gerry says the new wind project has given Clinton a much-needed boost. But new projects like Marble River may not be as feasible if the PTCs expire at the end of the year.
PTCs give developers 2.2 cents off their federal taxes for every kilowatt hour of energy produced. It’s helped the wind industry grow – and is one of the reasons the sector’s expanded in the North Country over the last decade.*
The industry argues that if the credit expires, it will be a lot harder to get new projects online.**
And all across the country, wind companies are scurrying to finish up construction and start producing energy by the end of the year so they qualify to take advantage of the current tax breaks.
Roby Roberts is the government liaison with EDP Renewables, the company that owns Marble River.
"The bad news is really for new projects because without some sort of policy signal for where the US market’s going to be, how are you going to price your products? And so you’ve just forced an entire industry off a cliff," Roberts said.
One of those new projects is right down the road in Chateaugay. EDP Renewables is planning another North Country wind farm called Jericho Rise. It’s early in the development stages, and the company says that if the PTC expires, they may need to take another look at the project financials.
"Typically we’ve seen up to an 80 percent reduction in wind development when the PTC has been dropped," explained professor Stephen Bird, who teaches energy policy at Clarkson University. "A developer may have already signed some leases but they’ll essentially put everything into kind of hibernation mode until the subsidy comes back."
Bird says the production tax credit is subject to a boom and bust cycle. But, it’s not totally clear what will happen in the North Country if the PTCs expire.
There aren’t any turbine manufacturers in the region, and wind farms provide only a handful of long-term jobs.
Professor Martin Heintzelman, also at Clarkson, says that it’s landowners like Miller who’ve reaped the benefits of the wind boom.
"The real economic benefit from the wind turbines are the payments that the developers provide to the lease holders well as to the towns through the pilot programs, the payments in lieu of taxes. It’s a large infusion of cash relative to their farming income or whatever it might be," Heintzelman said.
But there’s also a downside to this cash cow. Heintzelman recently conducted a study of three North Country counties with wind farms. He concluded that having a wind turbine on your land can result in a decline in property values.
"It’s not clear to us at this point whether wind energy in the North Country is indeed a net positive or net negative for the local residents," said Heintzelman.
But in other parts of the country, a slowdown in the wind industry has serious repercussions.
Vestas, the largest wind turbine manufacturer in the world, has already reduced its workforce in the U.S. and Canada by 20 percent. That’s around 800 jobs -- many of them at Vestas’ four Colorado factories.
Wind sector workers have been laid off in Minnesota, Texas, North Dakota, Iowa, Kansas, Florida and other states because of the uncertainty surrounding the production tax credits.
Back in Clinton, Gerry Miller still has hope for the industry.***
"It really benefited the town a lot and I think in the future they’re going to be able to do more," he said.
But until Congress decides what will happen to the PTCs, that future remains uncertain.
*Editors note: See here for a more detailed breakdown of the tax credit regime.
**The tax credits are generally applied for ten years based on the date the installation was commissioned and there are also carryover provisions. Currently a whole range of other renewable energy PTCs will expire at the end of 2013. See the link above for more information.
***Also visit Joanna Richards story here, for a contrasting story of the community opposition to wind energy expansion by BP in St. Vincent.