Congressional Inaction May Halt $100M Arkansas Wind Manufacturing Plant: 'No PTC, No Wind Turbine Plant'

Stephen Lacey, Climate Progress
March 15, 2012 | 2 Comments

And so it begins. In January, wind turbine manufacturer Vestas announced that it would lay off up to 1,600 American workers if Congress cannot extend a key tax credit for the wind industry. And now, Mitsubishi Heavy Industries, a large emerging player in manufacturing and project development, says it will scrap plans to build a new $100 million plant in Arkansas without the tax credit in place.

Even with strong bipartisan support among governors, the business community, and many members of Congress, a small group of anti-clean energy opponents have held up passage of the production tax credit.

Recharge News has reported on the latest comments from Mitsubishi on the lack of action in Washington:

In 2009, the Japanese company revealed plans for a $100m nacelle manufacturing plant in Arkansas to support demand in its main market. It was scheduled to have opened earlier this year.

However, turbine sales are certain to plummet if Washington does not renew theproduction tax credit (PTC), which is due to expire at the end of the year.

“We need a market to operate our factory. Right now, the market is not so good. We have a site but cannot operate it,” says Yoshinori Ueda, assistant general manager of MHI’s wind turbine business. “If we have the PTC, we will go ahead.”

Without a firm outlook for more equipment orders, it doesn’t make sense for Mitsubishi to operate the U.S. plant. That would mean the end of 330 long-term manufacturing and operations jobs in Arkansas before they had a chance to start. What a great sign that sends to global investors.

Meanwhile, the oil and gas industries enjoy permanent tax benefits for manufacturing and drilling operations. (The top five oil companies brought in $137 billion in profits last year alone.)

The production tax credit provides wind developers with 2.2 cents in tax benefits for every kilowatt-hour of electricity produced. It has been a central driver for wind deployment in the U.S., helping drive down the cost of wind electricity by 90% since it was introduced.

Because of that support mechanism wind is more competitive than ever. However, extremely (and unsustainably) low natural gas prices are making it difficult for developers to compete. Without an extension of the tax credit, the short-term market for wind could be completely squashed — taking investments in manufacturing, R&D and installation with it.

Without an extension of the production tax credit, the wind industry predicts it will lose up to 37,000 jobs across the U.S.

This article was originally published on Climate Progress and was republished with permission.

Image: Amy Johansson via Shutterstock

2 Comments

ANONYMOUS
March 21, 2012

I have to agree with the previous post. Using terms like "clean energy opponents" to describe those opposing federal tax subsidies is a bit disingenuous. Does the author really expect us to believe that these groups or individuals are opposed to a particular source of energy simply because it's "clean"? She would gain more respect if she described them as what they are: "US federal PTC opponents". Frankly, I don't know a single person, including those that work in the oil/gas business, that would be opposed to any source of energy simply because it's "clean".

The author also claims there is widespread support among state governors for these types of tax credits. If that is true, there is nothing to stop these governors from enacting similar tax legislation within their own states. They could simply bypass the US Congress.

I'm a big supporter of wind energy because I think it has great promise. But also being a believer in free markets, I'd like to see any form of taxpayer subsidy payments eliminated. Instead of whining about the fact that technology has made natural gas cheaper, or the perceived unfairness of government handouts, I'd like to hear wind energy proponents challenging our own industry to work harder at making wind cost competitive.

ANONYMOUS
March 16, 2012

The author makes reference above to "a small group of anti-clean energy opponents." This is an unfortunate double negative. Perhaps the author merely meant "clean energy opponents," but even that is a biased term not appropriate for a news story. Some of these people oppose energy subsidies, which is not the same as opposing clean energy. Some come from the south, which has very poor wind resources, so they naturally see the PTC as providing no benefit for their region of the country. The faction opposed to this particular attempt to pass a PTC have complex motives no so easily pigeonholed as "anti clean energy."

Provisions such as this are usually passed in large packages filled with quid pro quos in which everyone gets something they want. If this had been an administration priority they would not have waited until so late in an election year to get it done and they would have pushed for a multiyear extension together with enough carrots (e.g., moving forward on the Keystone pipeline) to get the votes they needed. Instead the administration wants to make the PTC permanent--which is clearly too expensive if wind becomes 20% of electricity generation. It is unfortunate that there is no near term visibility concerning wind energy subsidies but is isn't surprising given the politics involved. Eventually these subsidies are going to need to go away and it would be best if the schedule for that was laid out well in advance of when it occurs.
Steven

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Stephen Lacey

I am a reporter with ClimateProgress.org, a blog published by the Center for American Progress. I am former editor and producer for RenewableEnergyWorld.com, where I contributed stories and hosted the Inside Renewable Energy Podcast. Keep...