Project Development, Wind Power

Energy Bill Failure Forces Downturn for Wind

The much contested energy bill’s failure in Congress has brought temporary relief to nearly every U.S. environmental organization, and even some renewable energy groups. The nascent wind industry however, has received a serious blow since renewal of their most important tax credit was tied up in the bill.

Washington, D.C. – December 8, 2003 [] While the overarching legislation gained the support of the main Washington D.C. renewable energy trade associations for a variety of beneficial legislation, the bill also earned the scorn of other renewable energy, environmental, and policy groups, due to lavish subsidies to the fossil fuel, and nuclear industries, while doing little to improve pollution and energy efficiency. “I believe the bill was bad public policy,” said Joel Stronberg, a Washington representative for the American Solar Energy Society (ASES), which publicly spoke out against the bill. “Notwithstanding provisions that supported sustainable energy technologies, the legislation was little more than the combined wish lists of the fossil and nuclear industries–to say nothing of letting polluters off the hook, leaving the American taxpayer once more holding the bag.” Congress gave up on it for other reasons though. Legislation due to unresolved regional and partisan disagreements held up the bill at the last minute. A major sticking point was liability protection for the manufacturers of MTBE, a gasoline additive that has been shown to cause pollution and is very expensive to clean up. Although support for the bill created intense debate in the renewable energy community, the major casualty for renewable energy was the inability of Congress to renew the wind industry’s Production Tax Credit (PTC). The wind energy PTC, which provides a 1.5 cent per kWh (adjusted for inflation), will now expire at the end of this year without being extended, “…causing yet another damaging ‘boom-and-bust’ cycle for the industry,” according to the American Wind Energy Association (AWEA). A three-year PTC extension had been included in the energy bill. The extension, which enjoys strong bipartisan support, would have supported continued development of utility-scale wind energy into 2004 and beyond, on the heels of one of the best years ever for the industry, said AWEA. Initial estimates by the industry organization are that some 1,600 MW of new wind energy generating capacity will have come online in 2003 in the U.S., bringing clean power, jobs, and economic development to a cumulative total of 30 states. “It is impossible for the U.S. wind industry to maintain a steady growth rate in the present climate of uncertainty,” said AWEA executive director Randall Swisher. “Failure to extend the PTC means that contracts are put on hold, workers are laid off, and the momentum that had built up this year in the U.S. wind energy market is once again brought to a halt.” The layoffs have already begun too. “DMI Industries, a tower manufacturer based in North Dakota, has already laid off 102 of 156 employees, and we expect further cutbacks and layoffs in the weeks ahead,” said Tom Grey, AWEA’s Deputy Executive Director and Director of Communications. “The immediate impact on the market will be fairly dramatic. We have been through this before and will probably see what we have seen in the past – projects being delayed or put on hold, companies laying off employees, and so on.” In Texas, Lone Star Transportation of Fort Worth, Texas, would lose as much as $1.5 million in revenue per month due to the PTC delay, according to AWEA. In 2002, a full 20 percent of Lone Star company revenues came from wind energy – by trucking wind turbine blades, towers, generating units and other equipment to development sites. The PTC has been extended twice over the past five years, in 1999 and again in 2001, but each time Congress allowed the credit to expire before acting, and then approved only short-term extensions of two-and-a-half or two years. The timeline for gaining an extension is uncertain. According to AWEA, Republican leaders have decided that energy tax items – including the PTC – should not be included in the stopgap measure to extend expiring tax credits until mid-2004 that has already been approved by the House and is now under consideration in the Senate. They say such items should be included in an energy bill and they will take up the energy legislation again next year. “The PTC extension is one of the more popular provisions in the energy bill, and it is unlikely that Congressional leaders will allow it to come to a separate vote as long as there is a chance to pass a broader bill,” said Grey who doubts efforts to pursue a PTC extension separately would be successful. “Not unless and until a decision is made that passing a larger bill cannot be done. If that does happen, it will be much more difficult to obtain a three-year extension.” While the PTC was one of the major renewable energy casualties, there were other legislative efforts put on hold. The energy bill would have provided, for the first time, a small wind turbine investment credit to benefit homeowners or small businesses that elect to use wind systems to meet all or part of their electricity needs. The solar industry and its proponents would have gained incentives worth an estimated $400 million or more over the next five years, according the Solar Energy Industries Association (SEIA). The biofuels and biomass industries would have fared well under the bill’s establishment of a national Renewable Fuels Standard (RFS). Geothermal and hydropower would also have benefited in a variety of ways. Ken Bossong, coordinator of the Sustainable Energy Coalition (SEC), an umbrella policy group for nearly all the renewable energy industries and a host of environmental groups, was torn between his own views and those of his constituents. Although the SEC couldn’t come to a consensus on the bill since they represent so many industries, Bossong was personally against the bill and believes the bill’s failure (perhaps momentary), “…poses serious problems for the renewable energy industries and, to a possibly lesser degree, the energy efficiency industries.” The dilemma over supporting an overall flawed piece of legislation for its few benefits has Bossong considering the possibility of a new approach. He believes that safe, sustainable energy groups should call for a segregation of the efficiency and renewable energy provisions from the bill and that they should be passed separately. “That may be deemed politically unrealistic but I think it is a principled position,” Bossong said. “The key renewable energy and energy efficiency provisions in the comprehensive energy bill all enjoy broad congressional support as well as even greater public support. They should not be held hostage to the environmentally dangerous or fiscally irresponsible provisions that are weighing down the whole bill.” Bossong said it is clear from past votes that there is majority support for such provisions as the RFS (absent the MTBE waiver), the Renewable Portfolio Standard, extension and expansion of the PTC and the assorted renewable investment tax credits, higher authorization levels for renewables and energy efficiency, the appliance efficiency standards, most of the efficiency tax incentives, and probably most of the other renewable energy/energy efficiency provisions as well as the call for setting a national goal for reducing oil imports. These provisions should be allowed to be voted upon and approved by the Congress independent of the fossil fuels, nuclear power, etc. provisions, Bossong said. Of course it was some of those provisions in the first place that enticed the various renewable energy industries to support the bill. Whether there were enough positive provisions to warrent support was the main question, said ASES’s Joel Stronberg. “There are times when even a significant amount of support for sustainable technologies is not worth the cost of compromise–this year’s energy legislation was one of those times,” Stronberg said.