Wind Energy Deal Winding Way Through Congress

Ken Silverstein | Dec 12, 2012

 

With the 2012 coming to a close and 2013 about to emerge, Washington is full of prognosticators. In the energy world, questions abound. But perhaps none have generated as much controversy as the production tax credit given to wind, which expires at year-end.

It all centers on the tax credit awarded to renewable energy producers worth 2.2 cent per kilowatt hour. The one for solar does not expire for another four years. But the one for wind is about to die unless Congress resets it. Supporters say that it is essential to help build out clean generation and that once it gains a foothold, it would no longer need that type of assistance. Such proponents credit it with preserving 75,000 jobs. Critics, on the other hand, says that it distorts energy markets and that such handouts are excessive.

But with the nation about to fall over the “fiscal cliff,” U.S. lawmakers may strike a deal that would not only avert rising middle class taxes but also one that would keep this wind tax credit going for another year. During that same time period, Congress has given all indications that it would revisit the entire U.S. tax code in an effort to reduce tax rates for individuals and businesses in exchange for wiping out loopholes and favors given to all taxpayers.

In an interview with Iowa reporters via a conference call and one that was printed on the RadioIowaNews website, Republican Senator Chuck Grassley said that the wind tax credit would go through before the year-end deadline. He said it would be tossed into the mix with other such breaks -- favors that have not gotten nearly the amount of attention as the one provided to wind.

What makes Grassley’s position “unusual,” is that he is breaking from his official party line. That’s not really a surprise as Iowa’s economy has a strong link to the wind community that provides hundreds of direct jobs there. During the presidential election, President Obama came out strongly in favor of such a continuance while his opponent took the opposite view.

“I believe when we break the ice and there’s a framework put together ... then that gives the other committees of Congress an opportunity to operate,” says Grassley, as reported by RadioIowa. “I think that you’d find unemployment (compensation) and the wind energy tax credit and 59 other tax incentives that are expiring at the end of this year just kind thrown into that package.”

Not So Fast

Grassley’s predictions may be a hopeful sign to the wind industry. But it is still getting met with an equal and opposite reaction from the other side -- a foe that still puzzles the wind sector: Exelon Corp. Ironically, the company used to sit on the board of the American Wind Energy Association and its corporate headquarters reside in Chicago, which is President Obama’s hometown.

Exelon’s Chief Executive Christopher Crane is in Washington this week to meet with U.S. lawmakers. His goal: to end the production tax credit for wind only. The National Journal is reporting that Exelon’s participation in this debate appears to have silenced the Edison Electric Institute, which had signed a letter endorsing the wind tax credit about a year earlier.

“I think Chris has his priorities in exactly the right place,” says John Rowe, who is Exelon’s former chief executive in reference to the current leader there, Christopher Crane. His interview was given to the National Journal’s Amy Harder. The company continues to say in public forums that the tax credit is distorting competitive wholesale energy markets and it is causing financial harm to other, more reliable energy sources.

Exelon is principled. But it is also looking out for its shareholders. In other words, it has 900 megawatts of wind that operates in 10 states, but it has about 32,500 megawatts of nuclear generation. As such, it has fought hard not just for nuclear loan guarantees but also for tougher clean air standards that give it a leg up over those utilities that rely on coal.

At the same time, it is saying that wind’s production tax credit (PTC) has outlived its usefulness. But it is predicting that wind power generation would continue its growth trend upward even without favorable tax treatment.

Odds are that Senator Grassley will get this one right. Exelon’s efforts, however, won’t be in vain. That’s because of the bipartisan support to minimize all tax breaks in exchange for lower tax rates. But that’s a monumental task that has not been tried since 1986. In the event those lawmakers fall short, the production tax credit will remain a chit to be exchanged during negotiations.


EnergyBiz Insider has been awarded the Gold for Original Web Commentary presented by the American Society of Business Press Editors. The column is also the Winner of the 2011 Online Column category awarded by Media Industry News, MIN. Ken Silverstein has been honored as one of MIN’s Most Intriguing People in Media.

Twitter: @Ken_Silverstein

energybizinsider@energycentral.com