Goshen News, Goshen, IN

December 13, 2012

Tax credit debate sucking the wind out of wind industry

Dave Sutor
CNHI News Service

JOHNSTOWN, Pa. — The wind industry's turbines are stalling over doubts about the future of a 20-year-old tax credit, and the uncertainty is already costing jobs and cancelling projects.

A Gamesa turbine plant near here, in Cambria Township, has laid off more than 160 workers so far this year because of slacking demand for windmill parts. Iberdrola Renewables recently canceled a 24-turbine wind farm planned for mountains south of here, near the Maryland-Pennsylvania border.

Wind developers aren't planning new projects, said David Rosenberg, Gamesa's vice president of marketing and communications, which means the supply chain is slowing and thousands of people are out of work. The wind industry employs about 75,000 people in the United States, and most of its projects are on 12- to 18-month schedules

Clouding their future is uncertainty surrounding the federal tax credit, which expires at the end of the year. Wind energy producers get a 2.2-cent credit for every kilowatt hour they put into the power grid. The credit enables some to cut as much as one-third of their operating costs, which supporters say inspires more wind development.

"It’s very important to get the tax credit. It's very important for the industry," said Dan Lagiovane, a communications manager for EverPower, a Pittsburgh company that operates four wind farms, including two in Pennsylvania, and is building two others in the state.

If renewed by Congress, the credit will cost $1.36 billion per year between now and 2015, according to the Congressional Joint Committee on Taxation. The American Wind Energy Association says the credit, in turn, leverages $15.5 billion in private investment each year.

The tax credit's survival isn't certain, despite President Obama's support for it during the fall campaign. Obama's negotiations with Republican House Speaker John Boehner over the budget deficit have cast doubt over most tax credits and loopholes.

In addition, critics from other energy sectors call the wind power tax credit unfair. Some economists say it hurts, rather than helps, the energy market. And some deficit hawks say it should be scrapped with other tax breaks.

The tax credit's fate will have a wide impact on Pennsylvania.

More than 400 turbines in the state produce 3.5 million megawatt-hours of energy a year - enough to power more than 300,000 houses. Nearly three-quarters of those turbines are in central Pennsylvania - in Cambria and Somerset counties, near Johnstown.

The state is encouraging more windmills, said Patrick Henderson, energy executive for Gov. Tom Corbett, through policies such as a requirement that utilities sell a certain amount of energy from alternative and renewable sources.

Also, Pennsylvania is one of few states where a "fully competitive electric choice market" allows alternative energy companies easy access to consumers, said Henderson.

Those rules spur projects such as EverPower's Patton Wind Farm, a cluster of 15 turbines spread over 2,700 acres of farmland north of Johnstown. The facility is scheduled to go on line by the end of the year.

“Some of the farmers said they’re harvesting the wind instead of grain,” said state Rep. Gary Haluska, D-Patton.

Despite such local developments, the wind industry's attention is now fixed on Washington.

“When we look at the path forward for the wind industry, right now, the uncertainty of the production tax credit is an important factor,” said Paul Copleman, spokesman for Iberdrola, which canceled the 24-turbine farm. “Plus, if you look at the state of the energy market, with prices being low, there is not a lot of demand right now.”

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Dave Sutor is a reporter for the Tribune-Democrat in Johnstown, Pa.