Op-Ed: The wind revolution — Why Congress should extend tax credit Special

The production tax credit for wind energy is set to end in December of this year and whether it should be renewed has been a recent topic of debate. This begs the question; is wind energy a viable and important part of our energy policy?

On December 31, 2012 the federal renewable electricity production tax credit (PTC) for wind energy is set to end; this has led to a lot of debate over the viability and importance of wind energy and the need for the PTC. With this in mind I have interviewed wind energy experts and politicians on both sides of the issue in order to break down this important matter. What is the PTC? It is first important to understand what the production tax credit is. According to The Database of State Incentives for Renewables & Efficiency (DSIRE)

The federal renewable electricity production tax credit (PTC) is a per-kilowatt-hour tax credit for electricity generated by qualified energy resources and sold by the taxpayer to an unrelated person during the taxable year. Originally enacted in 1992, the PTC has been renewed and expanded numerous times, most recently by H.R. 1424 (Div. B, Sec. 101 & 102) in October 2008 and again by H.R. 1 (Div. B, Section 1101 & 1102) in February 2009.

What this means in layman terms is that companies who build renewable energy facilities are able to get a tax credit for each kilowatt-hour (kWh) of renewable energy they produce. According to DSIRE this last for ten years from the date the facility is built in most cases – though it is only 5 in some. In the case of wind energy DSIRE reports that a 2.2€/kWh credit is applied; however, this credit is set to expire for wind energy at the end of this year (for all other forms it is set to end in December of 2013). Is wind energy important? The first question that comes to mind when trying to decide if we should extend the PTC is if wind energy is important at all; after all, if it is not then there is no reason to provide tax incentives to utilize it. With this in mind I spoke with Paul Gipe, an expert in the field of renewable energies and especially wind power. When I asked Mr. Gipe if he how important he thought wind energy in comparison to other forms (renewable and fossil) of energy he answered with an unequivocal “critically important” and followed up by saying he was, “a proponent of renewable energy policies, and wind is an essential part of that.” Over the course of the next half hour he explained to me the many advantages to having a “smart energy system” - not to be confused with a “smart grid” - that he says would “limit the need for batteries” while making “100% renewable energy” a possibility. Gipe goes on to point out that many countries in Europe are already dedicating themselves to reverting to 100% renewable energy in the future. He pointed out the many countries in which renewable energy already accounts for vast amounts of their total power grid; however, most notable was Portugal which Gipe states “receives nearly 50% of its energy from renewable sources” with “25% coming from wind”. (I was able to independently verify that 45% of Portugal’s energy will come from renewable sources by the end of the year, however, I was unable to find wind specific numbers to verify the 25% number.) Many opponents would point out that Portugal is a rather small country (especially when compared to the United States), however, Gipe points out that even large industrial countries like Germany are receiving over 20% of their energy from renewable sources which I was able to independently verify based on a Reuters report. That same report makes the notable point that wind energy accounted for 9.2% of their total energy on its own, making it the largest individual renewable energy source. Why are there opponents to wind energy if it is so beneficial? It would be easy to simply write off all opponents to wind energy as individuals who are somehow profiting from fossil fuel energy sources; however, this would be an unfair generalization and would ignore the real downfalls of wind energy. I did attempt to locate an opponent of wind energy to interview, however, was unable to. Regardless, I will do my best to present the primary arguments I have seen against wind energy; though it should be noted that after significant research I was unable to find many compelling arguments against wind energy. I will first point out two serious cons that Paul Gipe pointed out to me in my interview with him. First, the upfront cost of wind turbine farms is high. According to a report by Nuclear Fissionary wind is second only to solar in upfront cost. This upfront cost results in a larger per kWh price initially as the cost of building the facility is recouped. It is important to note, however, the same report points out that wind is one of the cheapest with regard to production cost. It is for this very reason that many supporters of the PTC believe it is necessary to keep energy cost down through the initial stages in order to set up for the long term benefits of cheaper and cleaner energy. The second con Mr. Gipe pointed out was the fluctuations in power production. This is often pointed to by opponents of many renewable sources (wind, solar, and hydro) as a point of concern. Gipe is quick to point out however, that we “now have data from Germany showing that wind and solar dampen out the fluctuations” in the way that “advocates and academics have said for decades” that they would. It is for this reason that he states it is important that we have a well rounded renewable energy policy focused on all forms, not just wind. Another major concern raised by opponents of wind energy is the fact that wind turbines can in fact kill migrating birds. According to Energy Informative, “[a] study from 2009, comparing the causes of avian mortality in the U.S., found that wind turbines are responsible for 20 000 annual deaths . . .” however, they are quick to point out that, “in comparison to annual avian deaths caused by transmission lines (175 000 000!)” this is a very small number. After much research the only other arguments that I could find against the use of wind energy seemed to be what are referred to as “not in my back yard” arguments. These pertain to the fact that wind turbines are far from pleasant to look at and can be somewhat loud to some people if they are nearby. I will leave it to the reader to decide if this is a justifiable argument. Should we subsidize wind power? When reviewed next to each other the pros of wind energy – and renewable energy as a whole – seem to far outweigh the cons. The question then becomes if the federal government should subsidize wind energy through the PTC. At this point the question becomes less a technical discussion on the benefits of wind energy, and more a political discussion with regard to federal spending. I reached out to several members of the Energy and Commerce Committee (E&C) and the Ways and Means Committee of the United States House of Representatives in an attempt to clarify their stances on the matter. The press secretary for John Shimkus (R-IL), Steve Tomaszewski (Rep. Shimkus sits on the E&C) and he told me that although Rep. Shimkus “has not stated a position at this time” on the PTC that he was for a “all of the above approach” which includes “traditional, solar, and wind” among other forms of energy. Tomaszewski was sure to point out, however, that “wind alone cannot handle base load requirements” but that in combination with other forms of energy the Congressman was, “not opposed to it”. When I asked, if the estimated “37,000 Americans [who] stand to lose their jobs within the next six months, according to the American Wind Energy Association” as reported by Politico affected the Congressman’s stance on the PTC he assured me that “Rep. Shimkus has visited wind farms and is familiar with the impact they have on communities,” however, he has not taken a stance on the PTC as it is an issue that will go before the Ways and Means Committee, not the E&C. I also reached out to the office of Congressman Bobby L. Rush (D-IL) who is the ranking Democrat on the E&C. They provided me with the following statement in strong support of wind energy and the PTC:

I believe wind energy is and will continue to be an important part of our nation’s overall energy portfolio. The wind industry has created tens of thousands of jobs in the Midwest and across the country and it has more than doubled its capacity over the past four years. As the Ranking Member on the Energy & Power subcommittee, I will continue to support wind energy as an important part of a comprehensive energy policy and that includes my support for an extension of the federal production tax credit, which is scheduled to end at the end of the year. As a valuable source of clean, domestic, renewable energy I view the wind industry as an integral part of the nations’ energy portfolio moving forward well into the future. I hope that we will be able to work in a bipartisan fashion to maintain federal support of the wind industry, as Congress has done for the more established fossil fuel energy sectors over the past several decades.

The idea of extending the ETC does have broad bipartisan support according to the White House which points to several letters from both industry and state leaders requesting that the PTC be extended. One member of the House Ways and Means Committee, Congressman Earl Blumenauer (D-OR) who currently is trying to pass a bill to extend the PTC. Unfortunately the Congressman was travelling so I was unable to speak with him directly; however, I was able to discuss the issue with his communications director, Patrick Malone, via email. According to Malone the bill that Rep. Blumenauer has before the committee would extend the PTC until January 1, 2017 (approximately 4 years). When asked how likely the Congressman felt the bill was to pass he responded that, “[h]e is optimistic that it can pass in a lame duck session. It’s a bipartisan bill that puts Americans to work." When asked why the Congressman felt it was important that the PTC be extended he replied:

Without the security of knowing if the PTC is going to be extended, wind energy part manufacturers have to shut down production and lay off workers. A four year extension in the PTC allows wind energy to remain competitive and brings stability to the market

I was unable to reach a Republican member of the House Ways and Means Committee, however, the Chairman Dave Camp (R-MI) has supported the PTC in the past. According to a 2009 press release from the office of Rep. Camp at that time he stated:

"I have always been a strong advocate for a more sustainable energy policy, increasing our utilization of domestic energy sources and reducing our dependence on costly foreign oil,” Camp said. “Keeping energy prices low is critical to helping our economy grow. That is why I authored the law to expand tax credits to produce wind and solar energy and incentives for consumers to purchase alternative fuel vehicles. Creating new sources of energy will also create new jobs in states like Michigan, where we are fast becoming a leader in solar energy.”

With the current political atmosphere of Washington it is true that his stance may have changed slightly, but this seems to be an indication that he is at least likely to support extending the PTC, although, I have been unable to find any statements made by the Congressman expressing his views at this time. Further, the strong bipartisan support that the bill has gives good reason that he would support it. After closely studying wind energy it become clear that it is in fact a viable, and critical, part of any renewable energy policy. Given the extensive upfront cost it is also clear that in order for it to be able to grow to its full potential it will require some kind of government subsidy to become a fundamental part of our energy policy, and right now the PTC seems to be the most fiscally and politically viable option. It is easy to forget that in the 1940’s hydro-power alone made up 70% of energy consumed in the United States according to the U.S. Department of the Interior and to therefore assume that any compelling argument for renewable energies is a pipe-dream for the future. New technologies, including those in wind, however, have made it a viable option for today if we are willing to invest in the infrastructure needed to make it work. As Paul Gipe said best, “there is a energy revolution going on, at one point this country led revolutions” but this is one revolution which the United States stands to miss if we don’t act soon.