Uncertainty in Air for Wind
Where is policy headed?
Bill Opalka |
Sep 14, 2011
The U.S. wind industry continued a recovery from the depths of last year. Is it enough? The industry’s trade association is looking ahead and doesn’t like what it sees.
The second quarter saw 1,033 megawatts added, bringing the first half 2011 total to 2,151 megawatts. There were only 1,250 megawatts added during the same time in 2010.
Once again, the American Wind Energy Association (AWEA) used the occasion to plead for an extension of a policy tool, the production tax credit. That’s expiring at the end of next year, so what are the chances of quick action, 17 months in advance?
Interesting, yet, was no mention of the conversion of the tax credit to a cash grant, which rescued the industry when the credit markets dried up in 2009. The economic stimulus got wind through 2009, with 10,000 megawatts added. Additional capacity was cut in half last year.
So the policy driver that’s most important now is the rush to take advantage of the cash grants before they expire at the end of December, not the PTC that runs through 2012, it says here.
Given the recent gridlock in Washington (If gridlock was the usual description of the past few years in the nation’s capital, what could possibly describe what happened during the past month or two? Just asking.)
Meanwhile, the rest of this year holds some promise.
An additional 7,354 megawatts of new capacity was under construction by July 1, more than at any time since the third quarter of 2008. The U.S. industry during the second quarter installed 1,033 megawatts of electrical generating capacity versus 709 megawatts during the same period last year, up 46 percent for the same quarter last year.
Over 2,500 megawatts of new construction were started during the second quarter, almost three times more new construction than began during the first quarter of the year.
Beyond this year is another matter.
Project activity and orders for 2013 and beyond are scant because of the lack of a predictable business environment, causing layoffs and even bankruptcies in American manufacturing plants and the supply chain, said AWEA.
Ironically, because of the Production Tax Credit and market stability over the past five years, domestic content in the U.S. industry reached a record high of 60 percent through 2010, according to a recent Department of Energy report.
“Clearly Congress cannot take for granted all the wind energy manufacturing and construction jobs that have been a bright spot through the recession,” said Denise Bode, CEO of AWEA.
The U.S. wind industry now totals 42,432 megawatts of cumulative wind capacity, led by Texas with more than a fourth of the total. But what happens if Texas growth slows down? What happens without policy support?
The industry can get through 2011 and probably 2012, but then it’s anybody’s guess.
Comments
Yucca Mountain
Please recall that Yucca Mountain was a technical success. Its failure was political; the result of the ultimate congressional NIMBY reaction.
The feds would be wise to think through the implications of the environmental BANANA reaction before investing heavily in a potential replacement for Yucca Mountain.
policy
Agree with all the comments about government wasting taxpayer money. In the wake of Evergreen, Solyndra, etc., let's not forget also about the billions that went into Yucca Mountain.
The government will still need revenue if we get rid of all the incentive spending, why would a carbon tax be a bad way to collect some of that revenue? Wouldn't it be a lot like a federal sales tax, something that tea-partyers are proposing?
As for lost manufacturing jobs, Americans still have the ability to innovate...and legally protect those innovations on our home soil. A tax promoting the decline of fossil fuel spending also promotes investment and the ensuing innovation. That 'blunt instrument' might be a good thing.
Carbon Tax
Many in the Tea Party favor the Fair Tax, which would eliminate the federal income tax and obviate the need for the IRS. That is certainly something worth accomplishing. The Fair Tax would be applied to everything sold in the US, to anyone. Taxes collected from the sales of "basic necessities" would be rebated to taxpayers, so that the tax impacted only discretionary spending.
A carbon tax would be applied, directly or indirectly, only to coal, oil, natural gas, propane and products refined from them. It would increase the price of all energy sold in the US to all customers for all purposes. It would then work its way through the entire economy in proportion to the amount of energy consumed in providing each product and service.
There is currently no commercially available technology for removing carbon from the exhaust of electric utility power plants and storing it permanently. Even if there were, the time required to implement the technology in the nation's power plants would be several years. Therefore, the utilities could not reasonably escape the tax by reducing their carbon emissions in the short to intermediate term.
Also, while the carbon tax would increase the price of fossil fuels and thus tend to reduce their use in the economy, those reductions would be more than offset by increases in carbon emissions by the developing countries. Therefore, no global reduction in atmospheric carbon emissions.
carbon and fair taxes
Agree with everything you said except:
1- I don't like the idea of carve-outs in a fair tax, it opens the door for special interest problems just like our current tax code.
2- Issues with carbon emissions from developing countries is a foreign policy problem, not a domestic one. The US is still the biggest carbon emitter next to China, who does have aggressive renewable energy targets and is acting on them. Europe is in the same category. I think it's overkill to think we shouldn't act because of the potential for an emerging country to make up the emissions difference. Kind of throwing out the baby with the bathwater.
getting out of hand
I wont bother commenting on the peaks and troughs the government has created in most years by delaying extension decisions and allowing lapses, truly pathetic,
On a more serious note, the government has decided that they are portfolio managers and their investors are the tax payers. I will not argue this role. What I will argue is that the US government would be the worst portfolio management team in the investment community if ranked by institutional investor magazine. The recklessness and ease at which they dismiss objections is truly astonishing. They picked one of the most uneconomic sectors (solar, wind, biofuels) by today's standards and held it up as the solution to unemployment and national defense and tried to pass carbon tax to force green jobs to be equal or better in economic terms. Really astonishing. Portfolio managers of your money, remember that robin hood.
RE: policy
A carbon tax is just like any other tax. The revenues flow into the general fund and are spent (wasted) just like the revenues from any other tax.
From an environmental policy standpoint, the carbon tax is a blunt instrument. It affects all carbon emissions equally, regardless of the investment and time required to control them.
Now AWEA is pulling the jobs card
I wonder just how many jobs have been lost due to the taxes associated with the taxpayer funds that go to production tax credits or grants in lieu? Without those expenditures, taxes might have gone down or the national debt might not have gone up so much.
The tax credits and grants put money in the pockets of many a large corporation, some of which have not paid any income tax, and in the pockets of offshore manufacturers. I was in El Paso a few weeks ago and saw wind turbine blades coming in from Mexico across the Rio Grande bridges. Yep, green jobs alright.
policy
If you are like me and want serious tax reform (simplification) but also want to promote new energy technologies, what is wrong with a carbon tax? At least with a carbon tax the gov't doesn't spend (waste) money. This current plan of the gov't picking companies like Solyndra to give money to doesn't work!
Wind too dependent on government
fossil fuel jobs are All American
No other country WANTS fossil fuel jobs. Other countries were not throttled by the most important fossil fuel job - dirty fuel lobbiest. We shot ourselves in the foot. No country is stealing jobs from us, we had a chance some time ago to really create an industry and the big money won out.
Fossil fuels myths