POLITICS: PennAve

Wind credit to float away, but maybe not for long

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Politics,Congress,Taxes,PennAve,Energy and Environment,Zack Colman,Wind Energy

A key wind energy tax credit expires at midnight, but the industry's main lobby group isn't worried -- and an extension could be in the offing, albeit retroactively.

The wind production tax credit of 2.3 cents per kilowatt-hour won't be extended before the deadline. But letting it end this year is far less significant than in the past, the American Wind Energy Association has said, noting that a key language change last year allowed turbines that are "under construction" rather than producing power by Jan. 1 to receive the credit, which lasts for 10 years.

That alteration has compelled some big-name companies to announce expensive projects in the past several weeks. For example, Warren Buffett's electric utility, MidAmerican Energy Holdings Co., lodged a $1 billion order for wind turbines in December. So long as the firm has committed five percent of that funding by Jan. 1, it will be eligible for the credit -- the turbines must produce power by 2016 to actually receive it.

Still, momentum exists to get it extended sometime in the new year, making it potentially the second consecutive year lawmakers have breathed life back into the incentive after it ended.

Senate Democrats moved to extend a suite of expiring tax provisions that included the wind incentive just before the upper chamber skipped town earlier this month. It was more of a messaging item -- the Democrats made the move under unanimous consent, though they knew Republicans would block the measure.

"I am disappointed Republicans blocked this bill, which Congress should pass without delay and give our wind energy industry the certainty it needs to keep creating manufacturing jobs that support local economies throughout the nation," Sen. Mark Udall, D-Colo., said earlier this month.

Many Republicans want to let the 21-year-old credit die, which they say has become too expensive -- the Congressional Budget Office puts its 10-year price tag at about $12 billion. Nine GOP senators, as well as Democratic Sen. Joe Manchin of West Virginia, wrote to the Senate Finance Committee this month that the credit "picks winners and losers."

Democratic staff on the Senate Finance Committee, however, have laid down the markers for an extension. In a discussion draft on energy tax provision released earlier this month, staff suggested continuing the wind credit until 2017, when it and a slew of other provisions would be whittled down to two separate tax carve-outs.

That, of course, came before President Obama tapped Finance Committee Chairman Max Baucus, D-Mont., as the next ambassador to China, leaving the broad tax code overhaul he and House Ways and Means Committee Dave Camp, R-Mich., were seeking in relative limbo.

But that alone could provide space for a short-term extension of expiring credits, such as the one for wind. And Baucus' potential replacement atop the Finance Committee, Sen. Ron Wyden, D-Ore., is a fan of renewable energy and currently chairs the Energy and Natural Resources Committee.

Wyden was a vocal proponent of extending the wind tax credit last year in what became a highly politicized battle between Democrats and some Western and Midwest Republicans aligned in support of the measure and fiscal conservatives and Southeastern lawmakers who oppose it.

"Companies on the cutting edge deserve to have some certainty in their tax treatment and extending this tax credit will help them to compete against non-renewable energy sources and continue the success we’ve seen over the last decade," Wyden said last March in a sentiment repeated this year by the credit's boosters.

That uncertainty has led to a downturn in wind installations this year, the American Wind Energy Association noted — just 69.6 megawatts of wind power went online in the first three quarters of the year, compared with a record 13.1 gigawatts of capacity the previous year.

The credit's new language, however, make that situation less dire. An official for the wind lobby noted that the real push will be in 2014, as tax extensions typically occur in even-numbered years.

"At the same time the industry still lacks certainty in the medium and long term, and that is something Congress needs to address in the next piece of tax legislation. The legislative vehicle could be tax reform, an extenders package, or something else, but this can’t drag out for too long or else disruptions will occur again," said Rob Gramlich, senior vice president of public policy with the American Wind Energy Association.

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