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Martin LaMonica

A View from Martin LaMonica

Wind Tax Credit Survives in Fiscal Cliff Deal

The tax deal brokered in Congress extends a wind energy tax credit for another year but manufacturers had already begun to scale back due to the uncertainty and slowing growth.

  • January 2, 2013

The last-minute tax deal passed by Congress yesterday includes a one-year extension to a tax credit for wind industry, keeping a subsidy in place for wind energy projects.

Siemens set up manufacturing operations in Kansas to meet demand for the wind industry boom last year, but laid off workers earlier this year due to an expected slowdown. Credit: Siemens.

The package includes a “tax extender” that provides a 2.2-cent per kilowatt hour tax credit for energy produced at wind farms. The extension covers all wind projects that start construction in 2013, according to the American Wind Energy Association (AWEA), the industry’s lobbying group. President Obama is expected to sign the bill. 

AWEA estimates that the move will save up to 37,000 jobs at 500 factories in the U.S. but the possibility that the tax credit would not be extended has already caused wind manufacturers and their suppliers to scale back and lay people off.

Turbine manufacturers, including Siemens and Vestas, had set up manufacturing operations in the U.S. to supply the rapidly growing industry, but cut back in the middle of the year. (See, Siemens Layoffs Portend U.S. Wind Slowdown) About 70 percent of wind turbines used in U.S. wind projects are made in the U.S., according to AWEA. Project developers, meanwhile, were racing to finish up their installations before 2012 ended because it didn’t appear that the credit would be extended. 

The wording of the one-year tax credit extension, which is said to cost $12.1 billion over ten years, effectively means that wind energy projects that are not finished until next year will still qualify for the subsidy. “On behalf of all the people working in wind energy manufacturing facilities, their families, and all the communities that benefit, we thank President Obama and all the Members of the House and Senate who had the foresight to extend this successful policy, so wind projects can continue to be developed in 2013 and 2014,” Denise Bode AWEA CEO said in a statement

Forty four percent of the new electrical generating capacity came from wind this year, more than natural gas. Without extending the wind production tax credit, the US. Energy Information Administration and others projected very little new capacity in 2013.

While the wind industry can breath a sigh of relief, there will be continued pressure to eliminate the subsidy. In December, AWEA proposed extending the credit in 2013 and then phasing out the credit over five years, a position designed to avoid the boom-bust cycle that’s characterized the U.S. wind industry.

Utility-scale on-shore wind development is mature, but 2013 could be a significant year for advancing offshore wind technology. The DOE last month announced a plan to provide $47 million in grants over four years to demonstrate direct-drive turbines and new types of foundations for offshore wind. There are 4,000 gigawatts of offshore wind capacity in the U.S. but so far no projects developed. (See, DOE Grants Try to Crack the Code on Offshore Wind.) The tax extenders deal includes investment tax credits for offshore and community wind projects.  

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