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The expiration of a federal tax credit for wind farms could cause the nation’s top wind-power provider to put the brakes on its wind plans.
The wind production tax credit (PTC) significantly reduces the cost of wind power, but it’s set to expire at the end of 2012. Because of the amount of lead time it takes to manufacture turbines, an industry association says it’s already causing developers to hesitate on projects.
Xcel Energy, which has more megawatts of wind capacity on its system than any other utility, said this month that it will need to reevaluate its wind plans if the credit expires.
The utility is pessimistic about the odds of the tax credit being extended past 2012, which is says “appears unlikely at this point.” It’s working to accelerate its wind development as much as possible in the next 12 months, but after that it expects to wait for the market to settle before pursuing more projects. Here is what it had to say in a resource plan update filed Dec. 1:
“The PTC significantly reduces the cost of wind generation, without which it may not be a cost-effective investment. However, the PTC is set to expire at the end of 2012 and extension appears unlikely at this point. Thus, post-2012 wind projects may be significantly more expensive if they are unable to rely upon the availability of the PTC.
“We have explored the opportunity to procure low-cost wind generation between now and the expiration of the PTC, but the short timeframe also created significant construction, permitting and financing challenges. The Company will continue to explore opportunities to procure as much as 300 MW of additional wind generation prior to the PTC expiring. While we are eager to obtain low priced, cost-effective wind generation for our customers, we seek to avoid the risks of incomplete or failed projects. We will, of course, report to the Commission if we are successfully able to contract for additional wind generation prior to the PTC deadline.
“Currently we have significant installed generation and a bank of renewable energy credits that we can use to satisfy our renewable energy requirements. To the extent the PTC expires and wind prices increase as expected, we will be able to rely on our installed generation and banked RECs rather than adding uneconomic wind generation. Drawing upon our installed generation and banked RECs will allow us to wait for the market to settle and reevaluate market conditions in our next Resource Plan filing. This allows us to evaluate market conditions and acquire wind only if it is a cost-effective resource for our customers. Thus if prices do not spike or cost- effective opportunities become available, we may add wind generation. In this update, we have modeled various wind scenarios to reflect our options. Our revised Five-Year Action Plan reflects that we will not add more wind generation after 2012 unless it is cost-effective for our customers.”
The American Wind Energy Association (AWEA) says this type of hesitation is already causing a decline in orders from manufacturers. It issued a report (PDF) on Monday that predicts the U.S. wind industry will shed about 37,000 jobs if Congress allows the tax credit to expire. Extending the tax credit would spur the creation of 17,000 new jobs, it says.
“[T]hese jobs could vanish if Congress allows the Production Tax Credit to expire, in effect enacting a targeted tax increase, and sending our jobs to foreign countries,” AWEA CEO Denise Bode said in a news release. “Congress must act now to keep this American manufacturing success story going.”
Rep. Dave Reichert (R-Wash.) and Earl Blumenauer (D-Ore.) have introduced legislation to extend the tax credit four years. So far it has 44 co-sponsors, including 11 Republicans.
Photo by Olivander via Creative Commons