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Wind energy tax credit likely over, but effect may not hurt like before

Texas Tribune|Jim Malewitz|October 23, 2013
TexasUSATaxes & Subsidies

So how would Texas wind power fare if the 2.3-cent-per-kilowatt-hour incentive lapsed? That would depend on how long the credit is unavailable, observers say. But for a couple of reasons, the effect probably won't be as harsh as in past uncertain times. Jeff Clark, executive director of the Austin-based Wind Coalition, said he's not too worried about the ticking clock. “There's a lot of projects in the pipeline right now,” he said.


Dec. 31 is a curious date for Texas wind energy producers.

That's when transmission services providers expect to energize the last power lines built under the state's $7 billion Competitive Renewable Energy Zone initiative, the long-running effort to connect windy West Texas to the state's energy-thirsty big cities. The 3,600-mile project has been credited with spurring even more investment in Texas, the country's wind power leader.

But 2013's last day is also an ominous one for wind folks. It's the expiration date of the federal Renewable Electricity Production Tax Credit, the fate of which has driven booms and busts in the industry. The multibillion-dollar credit, which Congress passed in 1992, helps wind stay …

... more [truncated due to possible copyright]

Dec. 31 is a curious date for Texas wind energy producers.

That's when transmission services providers expect to energize the last power lines built under the state's $7 billion Competitive Renewable Energy Zone initiative, the long-running effort to connect windy West Texas to the state's energy-thirsty big cities. The 3,600-mile project has been credited with spurring even more investment in Texas, the country's wind power leader.

But 2013's last day is also an ominous one for wind folks. It's the expiration date of the federal Renewable Electricity Production Tax Credit, the fate of which has driven booms and busts in the industry. The multibillion-dollar credit, which Congress passed in 1992, helps wind stay economically competitive with other energy sources, including low-priced natural gas. Without it, the industry can't keep pace, even as production costs fall.

Last year, as the credit neared its demise, Congress extended it as a part of a last-minute budget package, but only for a year. This year, with Congress focused on finding a way to turn the government back on and pay its bills, lawmakers have yet to draw up a proposal for the credit, making a swift renewal increasingly unlikely.

So how would Texas wind power fare if the 2.3-cent-per-kilowatt-hour incentive lapsed? That would depend on how long the credit is unavailable, observers say. But for a couple of reasons, the effect probably won't be as harsh as in past uncertain times.

Jeff Clark, executive director of the Austin-based Wind Coalition, said he's not too worried about the ticking clock. “There's a lot of projects in the pipeline right now,” he said.

The 202-megawatt Baffin Wind Farm, in Kenedy County, is one project that's depending on the tax credit. However, owner and developer Iberdrola Renewables LLC isn't concerned.

Provided that construction gets underway before the end of the year, which is the current plan, the project still will receive the credit, Iberdrola spokesman Art Sasse said.

In the past when there was tax credit uncertainty, turbine manufacturers laid off workers well ahead of the deadline as projects stalled. For instance, Vestas, a major turbine maker based in Denmark, closed a Houston research and development facility last year that once employed 75 people.

But this year looks different.

Texas grid operators are reviewing some 21,000 megawatts worth of new wind capacity. Typically, about 20 percent of proposals end up being built. New projects in the Panhandle — including a 1,100-megawatt wind farm near Lubbock that would be the country's largest — are expected to exceed the capacity of the region's new transmission.

The transmission buildout has helped stock that list of projects, and a change in federal tax rules has helped, too. Developers now can claim the production tax credit for projects that are under construction as the year ends. Under the previous policy, qualifying turbines had to be in production to get the credit.

In other words, though new projects would stall without a prompt renewal, the new rule buys time for projects already under development.

Still, renewing the credit at a later date is hardly certain. Though the wind industry has long received bipartisan support, fiscal hawks in Congress are turning up the volume on calls that the country can't afford the credit — a one-year renewal would cost $6.2 billion over 10 years.

Wind energy advocates argue that the credit puts the industry on equal footing with competitors such as oil, gas and coal — industries that also have enjoyed plenty of tax incentives.


Source:http://www.mysanantonio.com/b…

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