“The sheer ridiculousness of the [six-year, front loaded PTC extension] outraged Congressional members and may well have changed the debate. It’s NO coincidence that within 24-hours of AWEA’s poorly received proposal, Denise Bode bailed. A move that sudden suggests the industry thinks it’s better off without her and probably without AWEA’s inflexible, out-of-touch campaign.”
The American Wind Energy Association's relentless, year-long lobbying campaign to secure extension of the wind production tax credit ("PTC") hit major headwinds last week which precipitated the abrupt resignation of its CEO, Denise Bode.
Branded the “Save USA Wind Jobs,” AWEA’s plan tried to stigmatize Congressional members from Red and windy states with the argument: oppose the PTC, and you oppose American jobs.
But rather than gaining support, resistance intensified to extending the PTC. With only two weeks remaining in 2012, it’s not certain what will happen with the subsidy, but one thing is clear: AWEA’s robotic jobs jab has chilled its effectiveness. Big Bucks cronyism does have its limits.
Changing Market; Inflexible Messaging
Prior to 2008, wind was still a niche resource. Under 15,000 megawatts of installed wind was eligible for the PTC and the price tag for the subsidy, in total for its first 15 years (1992-2007), was under $6 billion and less than $1 billion in any one year. Each time the PTC was up for renewal, Congress complied.
Since then, wind installations in the U.S. ballooned to over 50,000 megawatts and the carrying cost for a 1-year extension is now projected to be $12 billion .
In today's economic climate, AWEA's campaign messaging is withering under challenge.
The promise of wind jobs never materialized at the scale touted by AWEA calling into question the veracity of their models.
Claims that losing the PTC equated to a job-killing tax hike on the industry disregards the fact that the PTC, itself, is a tax borne by all Americans in an attempt to defray the high price of wind power where such capacity exists.
Assertions that the PTC "more than pays for itself in local, state and federal taxes over the life of the credits" ignores the fact that even after factoring in the PTC, localized economic benefits derived from operating wind projects are dwarfed by the significant above-market energy prices contracted for wind energy - particularly in this extended period of low natural gas prices.
The size of the subsidy relative to wholesale prices is also distorting competitive wholesale energy markets and harming the financial integrity of other, more reliable generation.
The Wind Industry Leaves AWEA
As the year wore on, AWEA and its surrogates added urgency to their message but never deviated from it. The public was hammered with warnings that the multi-billion dollar wind industry would face collapse if the production tax credit expired, leading some to question whether wind could ever stand on its own.
And where did that leave shareholders of Vestas, GE or any of the high-profiled turbine manufacturers? An industry built on government handouts exists at the political whim of those in office.
The market needed assurances, and in June, eight of the largest turbine manufacturers admitted they will adapt and grow, without the PTC. Even Vestas, which threatened to close shop in Colorado if the PTC expired, joined the other turbine makers in stating "they would not pull out even if Congress abandoned all renewable energy subsidies."
This story is much closer to the truth than AWEA's messages and is consistent with we are hearing in the market.
Unlike AWEA, companies in the wind industry have bottom-lines to worry about. Many, including Vestas and GE, are already preparing for a non-PTC business model. Layoffs have been scheduled, new markets in South American, Africa and elsewhere have been identified, and cash flow issues are being addressed through asset shedding and the possible partnering with other corporations.
Low natural gas prices and shrinking load demand will keep the industry focused on its bottom line for a while longer -- and that's a good thing.
We will also likely see the industry shift their business plans away from those based on tax avoidance to plans based on energy production - as they should be.
When Representative Pat Tiberi (R-OH), chairman of the House Select Revenue Measures Subcommittee asked AWEA in April to present a proposal for phasing-out the PTC, the trade group ignored the question. The idea of a phase-out fell outside the limits of their campaign messaging and thus, outside their ability to respond. Last week, the pressure for a proposal reached a peak and AWEA threw together a six-year, front-loaded extension with a price tag in the tens of billions.
The sheer ridiculousness of the proposal outraged Congressional members and may well have changed the debate on the topic. It's NO coincidence that within 24-hours of AWEA's poorly received proposal, Denise Bode bailed. A move that sudden suggests the industry thinks it's better off without her and probably without AWEA's inflexible, out-of-touch campaign.
As evidence of the changed game, the Washington Post two days ago gave AWEA’s signature proposal a big thumbs down:
"Some of those who sympathize with the wind subsidy, known as the production tax credit (PTC), say that it represents a second-best approach to supporting green energy. In fact it is not even a third- or fourth-best alternative to a carbon tax. At a cost of $1 billion a year, it offers wind operators a flat tax credit for every kilowatt-hour of electricity they produce. No matter if the grid doesn’t need the electricity at any given moment or if the policy blunts the incentive to reduce costs."
Let the PTC Expire!
The letters, resolutions, and advocacy statements by Congressional members who are on record supporting an extension of the PTC all sound like they were written by AWEA. If congressional members like Senator Grassley and Representative Kevin McCarthy based their comments and support on AWEA's lobbying campaign, this would be a good time to rethink their position. AWEA's unyielding messages are dated, and clearly 'stuck on stupid'.
It's time for the 20-year old subsidy to end. American taxpayers and ratepayers, and the wind industry itself, will be best served by letting the PTC expire.