POLITICS: PennAve

Offshore wind lobbies for credit to keep industry from blowing away

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PennAve,Energy and Environment,Zack Colman,Wind Energy,Tax Credits,Magazine

Companies looking to build an offshore wind industry are lobbying lawmakers to extend a key tax incentive as a larger onshore wind credit faces congressional headwinds.

No wind power is currently generated off U.S. coasts, though the Obama administration is hoping to change that. It already has proposed three commercial leases in Maryland, Virginia and Rhode Island.

More are likely on the way — the Energy Department's National Renewable Energy Laboratory says U.S. coasts could yield 429,000 megawatts of offshore wind electricity. Electricity capacity totaled roughly 1.1 million megawatts in 2011, according to the Energy Information Administration.

Locking up financing is another story. Without the tax credit, one industry source said, projects might never come to fruition.

That's why the industry is pounding the marbled pavement of Capitol Hill in hopes of including a one-year extension of an investment tax credit in a possible tax extenders package. The credit, which gives developers up to 30 percent of the project cost in cash up front, expired last year.

The industry's boosters say they are being realistic. While they want a long-term extension, they know the GOP is even reluctant to renew an onshore production tax credit.

Companies are trying to convince Republicans that the offshore credit, like the onshore one, is a jobs issue.

The onshore credit has developed a constituency over two decades that includes Republicans. That's not the case for the offshore industry, so its supporters say snagging a one-year extension might be the best outcome.

Offshore industry sources say the upfront cash injection is necessary to meet offshore wind's high capital costs. Supporters have pressed their case with staffers for Senate Majority Leader Harry Reid, D-Nev., and Senate Finance Committee Chairman Ron Wyden, D-Ore.

One industry source said it doesn't make sense to set up shop until the U.S. boasts an offshore capacity of between 1,000 and 2,000 megawatts, which would require between 200 and 400 turbines. That's a difficult milestone to reach without the investment tax credit, the source said.

Many Senate Democrats support extending the credit -- 24 of them urged the Finance Committee in a letter to extend it and other renewable energy incentives. Sens. Tom Carper, D-Del., and Susan Collins, R-Maine, are spearheading legislation that would award the 30 percent credit to the first 3,000 megawatts of turbines in service.

Developers for Cape Wind, the first project planned in Massachusetts' Nantucket Sound that is scheduled to break ground in 2016, are pointing to this winter's cold snap that drove up New England power prices as a reason to expand offshore wind.

"The type of production we get from these units during extreme cold is their very best production," Dennis Duffy, vice president of regulatory affairs for Cape Wind Associates, said in a Capitol Hill briefing.

But the offshore credit has its detractors as well.

Most of them are Republicans who say the White House is putting subsidized clean energy ahead of fossil fuel production -- which is blocked in the Atlantic Ocean through 2017 -- during what should be a time of fiscal belt-tightening.

"Selling leases in the Atlantic shouldn't be exclusive for the wind industry, especially when traditional energy is completely shut out of the same area," said Sen. David Vitter, R-La., the top Republican on the Environment and Public Works Committee.

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