The wind tax credit allows project developers or investors to reduce their tax payments by 2.2 cents for every kilowatt-hour of power generated over the first 10 years of a project’s life. That works out to about a third of the cost of an average project, though the cost per kilowatt varies widely, depending on location.
The tax credit has helped the industry expand rapidly. In the past five years, wind has made up 35 percent of new installed capacity in the United States, and more than 60 percent of the industry’s equipment is made domestically. But wind power still accounts for just 3 percent of the nation’s overall electricity, and low natural gas prices have undercut wind in some markets.
Testifying before the House Energy and Commerce subcommittee on energy and power this month, John Purcell, vice president for wind energy at Leeco Steel, said that while the wind industry has made tremendous gains, “we don’t feel like we’ve finished the job.”
“From my perspective as a steel guy, I am watching my customers laying off people all over the country, and I won’t be providing steel plates to any of them anymore,” he said.
That argument has gained some traction on Capitol Hill: Last month, the Senate Finance Committee passed a one-year extension of the tax credit, on a bipartisan vote of 19 to 5. Since the issue is likely to be resolved one way or another once Congress reconvenes in a lame-duck session after the November elections, both sides are launching major lobbying aimed at swaying House members.
AWEA has worked assiduously to court congressional Republicans, according to an internal board document the trade group prepared in November 2011 . The plan included a lobbying program focused specifically on getting House Majority Whip Kevin McCarthy (R-Calif.) to back the tax credit extension; in conjunction with Republican Hill staffers, developing a slogan based on focus groups; and co-sponsoring a series of events featuring GOP leaders with the news outlet Politico.
AWEA spent $560,000 on lobbying in the first quarter of 2012, hiring such Republican firms as the Ashcroft Group and Fierce, Isakowitz & Blalock and such Democratic ones as Elmendorf Ryan and David Gardiner & Associates.
At the same time, Exelon, a Chicago-based utility that faces stiff competition from wind, is fighting to kill the tax credit. Exelon, which generates 55 percent of its electricity from nuclear power, has backed Obama’s efforts to limit carbon emissions and promote alternatives to fossil fuels.
In a statement, Exelon spokesman Marshall Murphy said that while the company has wind power in its portfolio, it supports an end to the tax credit because it “distorts today’s competitive wholesale electric markets, causing severe financial harm to other, more reliable clean energy sources.”
The Alliance for Wise Energy Decisions, a group of conservative activists opposed to new wind projects, has brought on George David Banks, a former aide to Sen. James M. Inhofe (R-Okla.), and worked with FreedomWorks to mobilize online opposition to the tax credit through Facebook and other means. Americans for Prosperity, a group financed in part by oil magnates David H. and Charles G. Koch, also is pushing to eliminate the tax break.
Banks said in an interview that with Republican-leaning areas traditionally benefiting financially from wind, the issue has created unconventional political alliances.
“Because it’s a wealth transfer from areas of the country that don’t have wind to ones which do have wind, and have renewable mandates, this issue is more of a state-specific issue than a partisan one,” he said.
Even if the tax credit is extended, it’s unclear whether the wind industry will rebound right away. A June Congressional Research Service report noted that there has been a rush to install wind before the tax benefit expires, and “all projections reviewed for this report expect annual U.S. wind turbine demand to be less than the existing turbine manufacturing capacity — approximately 13 [gigawatts] per year.”
Steven Mufson and Alice Crites contributed to this report.