Wind producers seek equal treatment in fight for tax credits

Wind producers in Iowa say they want a level playing field when it comes to tax breaks.

They would go so far as to push for cutting tax breaks for other energy producers, like oil and gas, Iowa Wind Energy Association Executive Director Harold Prior said in an interview with IowaWatch.

That position, from the state with the nation’s third-highest wind energy production, puts them in line with a position favored by U.S. wind power advocates, led by the American Wind Energy Association.

“Do a long term extension of the production tax credit at the federal level and the investment tax credit for wind,” Prior said. “Failing that, remove the tax incentives, both within the tax code and outside the tax code, for all other generators of electricity so that we have a level playing field on which to compete.”

Prior said he knows there is little chance for Congress to repeal tax breaks for other fuel producers, but that wind producers are in a fight about equity.

“Should we be picking winners and losers through government subsidies? Probably not,” he said. “So if we’re not going to subsidize any generator, that’s fine. If we’re going to subsidize some generators we ought to subsidize them all.”

Wind energy advocates like the national and state wind energy associations are lobbying for an extension of the Federal Wind Energy Production Tax Credit, which gives wind energy producers a break of 2.3 cents per kilowatt-hour for the first 10 years of production.

That credit, referred to as the PTC, is set to expire at the end of 2013. Wind energy associations are pushing for a long-term extension of at least five years, preferably 10. The Iowa association has sent emails to its nearly 200 members and is working with a lobbyist to take its message to Washington.

BOOM-BUST CYCLE

The production tax credit has been renewed several times, often for only one or two years, since it was introduced in 1992. It has expired three times: in 1999, 2001 and 2003. In all three instances it was renewed the next year, but the industry sustained a 92 percent, 76 percent and 76 percent drop in productivity during those years, respectively, when the tax credit did not exist, the American Wind Energy Association reported.

The PTC expired at the end of last year but was renewed for Jan. 1 through the end of 2013 as part of the fiscal cliff deal that implemented federal spending cuts but also some new taxes for the wealthiest Americans. Uncertainty about the credit’s renewal in late 2012 led to widespread layoffs.

The language establishing the tax credit was changed this year so that construction on wind projects only had to be in progress by the end of the year rather than being completed in order to qualify for the credit.

This has led to a brief resurgence in wind turbine production in Iowa to meet orders like MidAmerican Energy’s recent announcement to build a $1.9 billion, 1,050 megawatt wind farm by 2015.

Prior said manufacturers like Trinity Structural Towers and TPI Composites in Newton are scrambling to rehire hundreds of workers laid off last year, and losing valuable production time.

However, the PTC renewal didn’t come soon enough to help Cedar Rapids-based Clipper Windpower, which at its peak had more than 700 employees and now has around 70. The company no longer manufactures wind turbines. Instead, it performs maintenance on its existing turbine fleet when required.

“When you renew (the PTC) late in the year, you’re not giving anybody time to react,” Cedar Rapids plant manager Rob Lloyd said in an IowaWatch interview this summer.

Prior said short-term renewals create a boom-bust cycle, with uncertainty and lost jobs for the wind energy industry.

“This is no way to treat a major industry contributor to the economic vitality of this country,” he said. “If we had stable, long term policies we wouldn’t see this happen.”

CONGRESSIONAL SUPPORT

Support is not lacking from Iowa’s congressional delegation. All six members, Democrats and Republicans alike, support the tax credit. Rep. Tom Latham, a Republican, said it has been crucial for consumers and development of Iowa’s renewable energy industry.

Wind towers dominate the landscape in northern Iowa in this photo, taken off Highway 218 in Floyd County in May 2013.

Iowa produces the third most wind power of any state in the country, behind Texas and California, and in 2012 the state got 24.5 percent of its energy from wind, more than any other state.

High production means that wind is responsible for about 6,000 to 7,000 jobs in Iowa, the state wind energy association reports, making it a constituency that elected officials do not want to ignore.

“The polling that was done preceding the last presidential election is really, really clear,” Prior said, referring to a poll done by the wind energy association, “that for any politician seeking statewide elective office in Iowa, it’s going to be a little more of an uphill battle for them if they’re not supportive of the wind energy industry.”

Republican Sen. Chuck Grassley favors equal treatment, based on merits, when it comes to tax credits. Grassley spokesperson Jill Gerber said. His feeling, Gerber said, is “if one is being considered for elimination they should all be considered either for retention or elimination.”

Iowa’s other senator, Democrat Tom Harkin, called renewable energy, including wind, “critical for the future of the U.S. economy and to our global competitiveness.”

“Progress has not been all that it could be because of uncertainty and delays in extending the PTC,” Harkin wrote in the statement for this story. “To lend predictability that will encourage greater investment in wind power I have urged a long-term or even indefinite extension of the PTC – 10 years at least.”

All four Iowans in the House, Democratic Reps. Bruce Braley and Dave Loebsack and Republican Reps. Tom Latham and Steve King, have signed a letter to the House Ways and Means Committee Chairman Dave Camp, R-Michigan, and ranking member Rep. Sander Levin, D-Michigan, requesting that renewable energy tax credits be included in upcoming tax reform legislation.

The letter was signed by a total of 67 representatives.

Latham praised the PTC and Iowa’s leadership in the wind energy industry in an email statement to IowaWatch.

“I strongly support extending this credit in some form to help wind solidify its footing in the energy market,” Latham said in the statement, “and I will continue to solicit input from the wind power community in Iowa and discuss this issue with colleagues to determine a way forward.”

Braley and Loebsack support making the PTC and other renewable energy tax credits permanent.

Loebsack also would support repealing oil and gas tax breaks if the wind production tax credit is not extended, his communications director, Joe Hand, said.

Braley’s press secretary, Kira Ayish, said the situation was too hypothetical for a comment.

Earlier this year Loebsack and Braley representatives sponsored H.R. 2539: Prioritizing Energy Efficient Renewables Act of 2013, which would make permanent the tax credits for renewable energies and eliminate certain deductions for oil and gas, including a deduction for intangible drilling costs.

As a Democrat-sponsored bill in the Republican House the bill is not expected to make it out of committee.

STATE INCENTIVES

Iowa could provide incentives for wind power at the state level to further attract new wind power, but the Iowa Legislature did not pass any energy incentives this year.

The state has a renewable portfolio standard in place that requires investor owned utilities MidAmerican Energy and Alliant Energy to buy or contract 105 megawatts of renewable energy between them. The utilities are exceeding this requirement.

Two tax credits are available for wind producers. One, provided in Iowa Code 476B, provides a 1 cent per kilowatt-hour credit for wind facilities for the first 10 years of production. The other, Iowa Code 476C, provides a credit of 1.5 cents per kilowatt-hour for wind and other renewable energy facilities, also for 10 years.

However, the credit in Iowa Code 476B only covers up to 50 megawatts of power, while the credit from Iowa Code 476C covers a maximum of 363 megawatts. The state does not offer credits for power produced over that capacity and wind energy production in Iowa far exceeds the amounts covered by the credits, rendering the incentives useless to new projects.

“There’s a need to add more credits,” state Sen. Rob Hogg, D-Cedar Rapids, said. “I personally think it’s important to have planned incentives on a long-term basis.”

Hogg praised Iowa’s net metering rules that allow excess energy generated by consumers to be credited to their bill the next month. Beyond that, however, Hogg said he does not believe Iowa’s renewable energy incentives are as strong as they need to be.

He added that Iowa’s incentives are lacking for other renewable energy sources. “While we’ve been a leader in wind, we’ve not been a leader in solar.”

That brings the discussion back to the Iowa Wind Energy Association’s hope of getting state-level energy incentives for wind.

“We’re certainly hoping that next year we’ll be able to maybe move some energy legislation forward in the state,” Prior said, “and part of that of course is dependent on what happens at the federal level.”