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The Race for Wind

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Fiscal Woes Driving Demands to Cut Tax Credit for Wind Power

November 14th 2012

Wind machine on dairy farm

Sen. Lamar Alexander (R-Tenn.) on Wednesday said the nation’s fiscal situation has become so dire that the government can no longer afford to maintain a wind power production credit that has been in place since in 1992.

“I think there is certainly the largest realization that we’ve ever had that it’s time for it to end,” Alexander said Wednesday at an energy policy breakfast hosted by The Hill and sponsored by the American Energy Alliance.

Alexander is a longtime opponent of the tax incentive, which credits wind power producers 2.2 cents per kilowatt-hour. The credit, which costs about $5 billon per year, is scheduled to expire Dec. 31. Democrats and Republicans from states with significant wind power industries are pushing for its extension during the lame-duck session.

While Alexander has historically been in the minority with his opposition to the credit, the Tennessee Republican said the impending “fiscal cliff” of deep automatic spending cuts and income tax increases set to take effect Jan. 1 has brought other lawmakers to his side.

“Today there are a great many in the House, for example, and Senate who recognize this especially for two reasons that really are hard to argue with, I think. One, that we’re broke,” Alexander said. “Even if it was justified in 1992 as temporary support, that time’s over.” The credit's fate will remain unknown for several weeks.

Sen. Chuck Grassley (R-Iowa) said Tuesday that the Senate would wait on fiscal cliff negotiations between President Obama and House Speaker John Boehner (R-Ohio) before moving the $205-billion tax extenders package that includes the wind credit. The credit might also be addressed in any bargain the administration and Congress reach on the debt.

A broad-based group of lawmakers in both chambers continue to support the credit. Senate Finance Committee Chairman Max Baucus (D-Mont.) said Tuesday evening that he sees a good chance of extending the credit in the lame duck, citing support on both sides of the aisle.

Lawmakers, mainly Democrats, have portrayed the credit as an employment issue. They often cited a wind industry-commissioned study that says ending the credit would kill 37,000 jobs.

The credit has also been a boon for rural communities in breezier states and driven billions of dollars of investment, Richard Caperton, director of clean energy investment with the left-leaning Center for American Progress think tank, said during the event.

Generally, support for the credit varies by state, though the renewed focus on the deficit has pushed some fiscal conservatives to oppose the credit. Most of the resistance has come from Southeast and Gulf Coast states, as well as a handful of anti-subsidy Republicans throughout the country.

The credit generally has backers in the 30 states with a renewable electricity standard, and where wind blows consistently. With 81 percent of wind installations residing in red districts, many GOP House members traditionally skeptical about clean-energy subsidies have held their tongues on the wind credit.

Despite the wide-ranging support for the credit, Caperton acknowledged that the credit should be phased out. But he said that discussion should occur next year when Congress works on broader federal tax code reform.

“We need to extend it in the lame duck this year so we get the one-year extension. And then next year when we’re having the big tax reform conversation, we need to seriously consider what to do with the wind industry,” Caperton said. Rep. Mike Pompeo (R-Kan.) said he hopes that conversation leads to the elimination of all energy subsidies.

Pompeo has led the House charge against the credit. He got 46 other House GOP members to sign a September letter urging Boehner to nix the provision. Pompeo said the wind credit’s history is instructive when debating the benefits of tax carve-outs for specific industries.

He pointed to a steep decline in wind turbine installations when the credit last lapsed in 2004 as proof that subsidies distort markets and investment. And planned projects and investments already are down for next year as a result of the credit’s cloudy future. “I think that’s further evidence that it’s non-economic,” Pompeo said.

Zack Colman writes for The Hill, from where this article is adapted.


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