Industryweek 6267 Windmills

Blown Away? US Suspends Wind Power Subsidies, For Now

Jan. 15, 2014
"You can't expect to take away support for wind energy while you're also protecting all of the various subsidies that flow to fossil fuel energy," said Sen. Sheldon Whitehouse, a Democrat from Rhode Island.

WASHINGTON - Historic subsidies propping up U.S. wind energy ended Jan. 1 and Congress refused to renew them, despite supporters arguing that the aid has made renewable power cheaper than coal.

The United States has subsidized wind-sourced electricity since 1992 to promote the use of green energy and crack America's dependence on the fossil fuels blamed for climate change.

Last year, billions of dollars in wind production tax credits, or PTCs, amounted to some 2.3 cents per kilowatt hour for an industry that has struggled to compete against oil and gas.

But winds of change are blowing. The repeatedly renewed credits expired at the end of 2013, along with many other renewable energy benefits.

Wind energy is now an industry that can "stand on its own," argued Sen. Lamar Alexander and other anti-tax-credit lawmakers last month.

"Our nation's energy policy must make economic sense for taxpayers and not manipulate markets," he and Sen. Joe Manchin of coal-producing West Virginia wrote in a position letter.

"After more than 20 years and tens of billions of tax-payer dollars, it's time to let the wind PTC expire and continue to invest in new technologies."

Wind power has experienced a recent boom, growing from 1.3% of the nation's electricity production in 2008 to 3.5% in 2012.

This leaves it still far behind coal at 37%, natural gas at 30% and nuclear power at 19%.

Wind, a Cheap Energy Source

Fueled by steady growth in wind farms and the falling cost of equipment like turbines, wind energy is now on average the second-cheapest U.S. energy source.

According to the Department of Energy, the average cost of natural gas from a new plant in 2018 will be 6.7 cents per kWh, compared with 8.7 cents for wind, 10 for coal and 11 cents for nuclear power.

Energy from offshore wind farms remains expensive, at 22 cents per kWh.

But the end of the tax credit hardly marks the death knell for a budding industry.

Wind operations whose construction began before Dec. 31, 2013 may continue to enjoy the federal benefit for 10 years; only new projects will be subsidy-free.

And regardless of congressional action in Washington, 29 states have set their own renewable energy targets, which essentially mandate operators to invest in wind.

The most populous state, California, is expected to produce one-third of its electricity from renewable sources by 2020, while the northeastern state of Maine has committed to 40% renewable energy by 2017.

A major tax reform bid underway in Congress could see the light this year and benefit wind energy producers.

Heading the effort is Sen. Max Baucus, whose unique proposal aims to end existing tax incentives and replace them with provisions to reduce greenhouse gas emissions.

But President Barack Obama has just named Baucus to be the U.S. ambassador in China, leaving the initiative in potential limbo.

Long-Term Policy Needed

Lawmakers from windy states in the northeast and central plains regions argue for maintaining the federal aid, saying their states have enjoyed booms in investment and jobs.

"You can't expect to take away support for wind energy while you're also protecting all of the various subsidies that flow to fossil fuel energy," said Sen. Sheldon Whitehouse, a Democrat from Rhode Island, who campaigns for wind to playing a greater role.

"And you particularly shouldn't do that when other nations are affirmatively investing in wind energy technology, because they see it as a future technology that they want to own."

The lack of a sustainable energy policy is putting strains on the wind sector, which after a productive 2012 saw new projects slump in 2013.

"Ultimately our industry will begin to feel the impacts of uncertainty in 2014," warned Rob Gramlich, senior vice president of the American Wind Energy Association (AWEA).

The wind sector wants its shrinking production costs to be matched by a rational and stable U.S. renewable energy policy.

Technological advances have helped drive down wind production costs by more than 40% in the last four years, noted AWEA's Lindsay North.

"Imagine what we could do with some semblance of policy certainty over the long term," she said.

Ivan Couronne, AFP

Copyright Agence France-Presse, 2014

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