Governors call for PTC extension

Seek action during lame-duck session

Bill Opalka | Nov 13, 2012


Governors from states with wind farms and manufacturing plants to serve the industry called on Congressional leaders for an immediate extension of the federal production tax credit (PTC) that is set to expire at year’s end.

The Governors’ Wind Coalition (GWC) is seeking at least a one-year extension of the PTC. Wind farms must be put into service by Dec. 31 to qualify for the 10-year subsidy.

In a letter to Congressional leadership today, Iowa Governor Terry Branstad and Oregon Governor John Kitzhaber urged Congressional leadership “…to take swift action to extend the PTC before the end of this congressional session.” Gov. Branstad (R-Ia.) is the chairman of the coalition and Gov. Kitzhaber (D-Ore.) is the vice chairman.

“Thousands of jobs in the wind industry have already been impacted by the credit’s looming expiration and thousands more are at risk,” the governors wrote. “We urge you to take swift action to extend the PTC before the end of this congressional session.”

In a conference call led by Sen. Chuck Grassley (R-Ia.), the father of the PTC at its inception in 1992, the officials from both parties stressed the number of jobs at risk as the industry contracts due to uncertainty. There are about 60 expiring subsidies across all industries, the so-called tax extenders that need attention before Congress adjourns for good just before Christmas. Previous extensions of the PTC have been passed in this way.

Those negotiations are ongoing in the shadow of larger discussions between House Speaker John Boehner (R-Ohio) and President Obama over the “fiscal cliff” to avoid automatic tax increases and spending cuts that kick in on Jan. 2.

“We know there are a lot of tough issues, but we think this is one that creates jobs and grows the economy,” Branstad said.

Kansas Gov. Sam Brownback (R) said the rush to build projects before the end this year led to 1,400 MW of new construction inducing $3bn in private investment. “All of those numbers go to virtually zero next year. We have virtually no new wind operations next year,” he said.

Siemens plants in Kansas and Iowa have laid off hundreds, along with hundreds more in Colorado by Vestas.

In a policy shift, the governors are willing now to consider a phase-out of the credit over the next four years or so, but the short-term extension takes precedence.

The GWC is a bipartisan group of 28 governors from across the country.

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Although I think the wind industry has violated the PTC during the BPA curtialment issue, the PTC does help other renewable energy such as small hydro. The PTC has the ability to help rural areas install small hydro on irrigation systems and use that wasted energy during the irrigation season - a tremendous help to the agriculture industry. That said there should be a sunset limit on those credits, when the business has been in operation for a set number of years and the debt service paid down then the PTC should be removed and the facility should be able to stand on its own. As for the curtailment issues, when the system can't handle more variable energy during low use periods, curtailment should be allowed without the utility having to pay for unused energy. I think that would incentivize storage development which would help both the grid and the wind industry. 

PTC is Both a Good Idea and is Needed Now

PTC is needed now because it both levels the utility planning playing field for clean technologies and it supports the creation of tens of thousands of 21st Century jobs.

Wind energy, and intermittent renewables in general do not have to have dispatchable, dependable capacity to be useful and valuable to the grid. Wind is still such a small contributor to the grid, that the grid’s existing capacity backs up an individual wind turbine or farm. It’s only when intermittent renewables become a significant contributor to the grid that additional energy storage is needed. When needed, storage, like transmission itself, should be a system resource so that utility scale economics can be captured.

The value that wind energy provides now, and for the foreseeable future is that when it does generate, it displaces, or should displace, higher incremental cost generation such as energy from coal or natural gas fueled generators. This does not have to only happen on-peak. The vast majority of coal and gas-fired generation occurs off-peak and therefore wind can always have a benefit by reducing generation from dirtier and more costly resources.

PTC is needed now because it helps to level the generation playing field in regards to legacy and outdated regulatory policies. Many states’ utility commissions do not allow for the full cost of carbon intensive generation, like coal and gas-fired power plants, to be allowed for ratepayer recovery. Beyond existing regulatory requirements for pollution control, costs related to public health impacts and the consequences of rising atmospheric and ocean CO2 levels from the pollution allowed to be emitted from fossil-fueled generators are not passed onto ratepayers thus artificially subsidizing the consumer cost from these sources. View PTC as the temporary mitigation for the external costs of fossil generation. Hopefully, PTC will no longer be needed as wind energy costs continue to decline and more fossil-fueled generation external costs are recognized in rates.

The idea that renewable energy projects should individually carry the cost of mitigating grid congestion and power quality of individual projects has long been a fact. Expansion of the grid’s reach to transport energy generation from more remote areas more has long been paid for by transmission charges to all customers. Many legacy hydroelectric, coal and nuclear power plants are far from load centers and have their energy conveyed by transmission systems whose costs are not directly included in the power plant’s cost. That’s why transmission assets are regulated differently than generation assets.



No, the PTC wastes #$%^&* taxpayer money

The PTC is a waste of money taken by coercion from taxpayers to pay for someone else poor decision to erect generation that has a poor capacity factor and generates at the wrong time of day to be effective.  The impact of PTCs is two fold:  money is taken from all taxpayers--the wealthy, the middle class, corporations, small businesses etc--and given to wealthy corporations to directly offset their tax bill which means additional taxes must be paid by others or the government has to borrow more money.  PTCs are STUPID business.

The only instance under which a PTC should be considered is if the wind generator also incorporates energy storage in his facility and that energy storage is capable of storing the full design capacity and energy output, ie both MW and MWh of the wind farm, and the wind generator pays to build the long distance transmission line from his remote site to the load centers.  Otherwise, the PTC simply distorts the electricity market in the region in which it is employed.