Denise Bode: Recovery Act Saved 40,000 American Wind Industry Jobs

Recent stories and campaign ads have challenged renewable energy tax credits:

Guest blogger Denise Bode, CEO of the American Wind Energy Alliance, responds.

Representing 85,000 people working in the American wind industry, we can say unequivocally that the Recovery Act’s 1603 tax credit has been one of the most effective public policies in existence for saving American jobs.

At a time when the recession threatened at least 40,000 American wind construction, manufacturing and other jobs, the 1603 tax credit program restarted stalled projects and saved all 40,000 jobs at risk. This year, a study by Lawrence Berkley National Laboratory (LBNL) found that the 1603 tax credit supported shovel-ready projects and over 50,000 American jobs. The 1603 program actually led to a record-breaking year of 10,000 megawatts (MW) of new wind in 2009, compared to the 4,000 MW feared prior to the Recovery Act.

Tax credits for renewable energy begin to level the playing field with oil, gas, coal, and nuclear energy. As a matter of fact fossil fuels have received permanent taxpayer money since 1920s, costing taxpayers well over $500 billion. Even in recent years, after maturing for a century, fossil energy still receives five times the subsidies as renewables, according to the Government Accountability Office. Even more, Americans pay for fossil fuel in the form of an additional $60 billion in health care costs, according to the Bush Administration report on hidden costs of energy.

We have a choice between a balanced energy plan that includes wind and renewable America energy or a plan that continues our increasing dependence on fossil fuels for our electricity, which is now over 60 percent. In the recession, project development and financing was difficult to obtain and costly. Many wind projects in mid-development could not complete financing. As a result, wind investment stalled with some projects stopping mid-construction; laying off construction workers and leaving wind towers and blades on the ground.

Every job saved was an American job. One hundred percent of projects that receive investment tax credits through 1603 are built in the United States, as required by the Recovery Act. The program also supports America’s growing manufacturing and supply chain industries. U.S. wind turbine domestic manufacturing has grown twelve-fold, with an increase in domestic content from 25 percent only a few years ago to over 50 percent now, and nearly 400 American manufacturing facilities making wind components. Contrary to recent campaign ads, data from the International Trade Commission (ITC) shows that less than five percent of the value of turbine parts used in the U.S. is imported from China.

The 1603 program continues and modifies the Production Tax Credit, which was first passed in 1992. In most respects the program operates exactly like all other tax credits in the tax code: all eligible projects receive the credit and it applies to all projects completed in a given year. However in one respect Congress tweaked the program to make the tax credit usable during a recession. Unlike the oil and gas industries which have other provisions called “Master-Limited Partnerships” (MLPs) to enable them to use tax credits, MLPs are not available to renewable energy industries. Instead, Congress provided for a reimbursement of the eligible tax credit, which made the program successful even in the deep recession.

The program is a more efficient use of taxpayer money because 100% of the incentive goes to the company making the investment and creating the jobs. Taxpayers get more jobs and clean energy per dollar spent. Many people have confused this program with discretionary government grants and recent news stories have suggested, for example, that the only projects that should receive the incentive are those begun after the Recovery Act was passed.

In this case, a key part of the program’s success was to complete many projects that had begun but were completely stalled, keeping Americans at work.

The 1603 tax credit program has been extremely effective at keeping Americans at work. Unfortunately, the program is set to expire at the end of 2010. Unlike oil, gas, coal, and nuclear industries who have permanent incentives, renewable energy industries will be stalled again unless Congress acts soon to extend the program into 2011 and 2012.

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