Monday, December 24, 2012

Wind power industry in West pushes to extend expiring federal tax credit

As Congress struggles to avert the year-end “fiscal cliff” of tax-and-budget policy, there’s one expiring tax law that isn’t getting much press: The federal tax credit that subsidizes wind power production.

Wind power advocates and leading politicians in the West say this credit, which expires in a week, should be extended to preserve thousands of jobs and a growing, clean-energy industry.

But others say it’s time to let this subsidy die, for it’s skewing electricity markets, hurting other power producers, and not delivering on its promise of jobs.

“They go build a wind farm, they’re there for three to six months,” says Bob Winger, a union boilermaker from Billings and vocal critic of wind power subsidies. “Coal mines and coal-fired power plants are jobs day-in, day-out. … Who are all of these people (in wind) that they say are employed?”

According to figures compiled by the state and the wind power industry, wind projects in Montana have created about 1,300 construction jobs the past seven years — but only 86 permanent jobs.

Montana coal mines, whose product is burned to produce power, employ about 1,100 people, and coal-fired power plants here employ at least another 400.

The wind power production tax credit pays project owners $22 for every megawatt hour (mwh) of electricity they produce.

In the Pacific Northwest right now, spot-market prices for electricity are averaging $25 per mwh. So, while sellers of other types of power get $25 per mwh, a wind-power plant will get $47 per mwh, with the subsidy.

On rare occasions this year, during “off-peak” hours of low consumption, wholesale electricity prices have actually fallen below zero on the spot market, with wind-power producers paying suppliers to buy their power so projects can continue to collect the subsidy.

They might pay the “buyer” $5 per mwh to accept the power, but they still make $17 per mwh because of the subsidy.

Wind power advocates say this “negative pricing” is a rarity, and that the subsidy is justified because it levels the playing field for wind, in the face of long-standing tax breaks and favorable public policy for the production of oil, gas and coal.

“Everybody gets energy subsidies,” says Van Jamison, a vice president of Gaelectric, an Irish firm developing wind farms in central Montana. “We have a long history of government choosing winners and losers over a long period of time.”

Jamison and others note that hydraulic fracturing techniques and horizontal drilling that have led to a boom in oil and natural gas production are beneficiaries of generous tax breaks.

Wind industry officials say the $22-per-mwh production-tax credit is vital for the industry, and without it, scores of projects will founder and thousands of jobs will be lost.

Winger doesn’t doubt the wind industry needs the tax credit to flourish. He just questions whether it’s worth it, and says the money is not going into the pockets of very many workers, because wind plants produce few long-term, steady jobs.

The wind power industry says it has invested nearly $1.4 billion in Montana the past decade. It acknowledges that much of that money buys wind turbine and tower components, some of which are manufactured overseas.

In addition to spending on turbines and labor, wind projects also make land-lease payments to landowners and pay property taxes. Together, those total about $7 million a year in Montana, according to the American Wind Energy Association.

Coal mines in Montana paid about $60 million in severance taxes, gross proceeds taxes and property taxes last year, and another $90 million in royalties to government and private parties. Coal-fired power plants also paid millions of dollars in property taxes.

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