Climate

The Wind Energy Victory In The Senate’s New Tax Bill

CREDIT: AP Photo/Sue Ogrocki

In this July 28, file 2014 photo, two donkeys run through a pasture in front of wind turbines in Calumet, Okla. Tax credits that helped lure dozens of wind farms to Oklahoma are now being blamed as an example of costly tax subsidies that are helping to blow a hole in the state's budget and are now being targeted for elimination by the Legislature.

At the end of last year, a group of senators effectively killed the wind energy industry’s most important tax benefit — a $13 billion tax break to help the industry compete with fossil fuels.

But now, another group of senators is trying to bring those tax breaks back.

On Friday, the Senate Finance Committee released a draft tax package that seeks to renew the Production Tax Credit (PTC) for wind power. If approved, the 2.3-cent per kilowatt-hour credit would be cemented for the next two years, until December 31, 2016. The bill is scheduled for a markup on Tuesday.

For the wind industry, the inclusion of the PTC renewal is indisputably good news. According to Jim Reilly, the senior vice president of federal legislative affairs for the American Wind Energy Association (AWEA), the PTC’s renewal would bring back a policy that “helped create tens of thousands of wind energy jobs and attracted hundreds of billions of dollars in private investment to the U.S. economy.”

The renewal would, of course, come at a cost. According to the bill summary, the PTC extension would cost $10.5 billion over 10 years.

But while that may seem like a lot, environmentalists point out that it pales in comparison to the tax breaks received by the fossil fuel industry, which some say will cost more than $135 billion over the same period of time. Environmentalists are keen to hone in on that fact, noting that the fossil fuel industry does not need those subsidies to ensure growth the same way that burgeoning renewable industries do.

“The wind industry needs certainty,” said Lukas Ross, a climate and energy campaigner for Friends of the Earth. “Exxon and Koch Industries don’t need to fight tooth and nail for their comparatively larger and historically much more significant share of the energy subsidies pie.”

The PTC has been built into the tax code for years to encourage wind energy growth. But the policy needs to be renewed every few years by Congress, and since 2012, it’s been subject to contentious debate.

One side, made up mostly of Democrats, argues that the PTC helps wind to compete with the oil and gas industries, which benefit from a wealth of permanent federal tax carve-outs. The other side, mostly Republican, opposes it on the grounds that it amounts to a form “welfare” that unfairly props up an industry present in some states but not others.

Aside from the PTC’s expiration last year, the debate has always resulted in the tax credit’s renewal. But the wind energy industry has still suffered as a result, because the debate created uncertainty — investors were unsure if the tax credit would be renewed, so many chose to invest elsewhere.

The fact that the PTC is back after its expiration last year is the result of “strong bipartisan work,” said Sen. Orrin Hatch (R-UT), the Senate Finance Committee’s chairman, in a statement on Friday.

Indeed, it’s not just Democrats pushing for tax breaks for wind. Sen. Chuck Grassley (R-IA) has long advocated for the PTC, most likely because more than 6,000 jobs are supported by his state’s wind industry. Other Iowa Republicans support the policy too — namely Reps. Steve King and David Young, along with Sen. Joni Ernst.

“With jobs and the economy at the top of Americans’ concerns, it would be a travesty for our new majority to put these jobs at risk,” Grassley said in a letter to Hatch earlier this month. “I know firsthand the boom and bust cycle that exists for renewable energy producers when Congress fails to extend these critically important tax incentives.”

The main difference between conservatives like Grassley and more progressive environmentalists is that conservatives advocate a gradual phase-out of the tax policy once the market stabilizes. Environmentalists, along with the wind industry, argue for a more permanent approach.

“Wind power is gaining strength but in the context of tax extenders, this Congress must extend the PTC and ITC for the longest possible time to avoid pushing American wind power off a cliff,” the AWEA’s Reilly said in an emailed statement.