Politics & Policy

Wind Lobby v. James Valvo

Tax credits don’t cost taxpayers a dime.

A recent column in National Review Online by James Valvo (“Disinherit the Wind,” September 10), contains numerous errors with regard to the federal wind Production Tax Credit (PTC), the policy driver behind the rapid growth in U.S. wind energy and associated jobs and American manufacturing since 2005. Let’s set the record straight:

The PTC is tax relief that only rewards results and doesn’t cost taxpayers a dime. It pays for itself, through federal, state, and local taxes paid by the expanded industry, including wind-farm operators and their employees. As Republican strategist Karl Rove said recently, “It is a market mechanism, you don’t get paid unless you produce the power, and we’re not picking winners and losers, we’re simply saying for some period of time we will provide this incentive as we scale up and get improvements in technology.” It creates the incentive for over $15 billion a year in private investment by a growing new American industry.

#ad#Most other energy incentives, like the depletion allowance for oil and gas, are permanent in the tax code. Some have been in place since the 1920s. As a matter of fact, U.S. government subsidies for oil, natural gas, and coal totaled over $500 billion from 1950 to 2006. Wind energy’s primary incentive, the PTC, has been allowed to expire multiple times, including in 1999, 2001, and 2003, causing a market drop of 73 to 93 percent; it has been continuously in effect since 2005 but only for one‐ or two‐year terms. In effect, incentives for new, clean energy technologies are temporary — while those for older, polluting energy technologies tend to be permanent.

The PTC is still needed to bring the wind industry across the finish line — to achieve full cost competitiveness with these other long-subsidized industries, and to offer consumers of electricity the full benefit of low-cost wind power that will never run out. The boom-bust cycle of tax-credit expiration and short-term extension keeps businesses in limbo, so they can’t tell if they should make needed investments in new factories and hire more workers.

Allowing the PTC to expire will harm the economy by punishing job creators. According to Navigant Consulting, 37,000 Americans, or half of all those employed in the industry today, will lose their jobs by the first quarter of 2013 if Congress does not extend the PTC. Generating 20 percent of America’s electricity from wind by 2030, on the other hand — a goal the industry is ahead of schedule to meet — would support roughly 500,000 good jobs in the U.S., with an annual average of more than 150,000 workers directly employed by wind companies.

The U.S. wind industry has proven again and again its benefits for American consumers. As the Southern Company said last year in signing its first contract for wind energy, “The price of energy from the wind facility is expected to be lower than the cost the company would incur to produce that energy from its own resource . . . with the resulting energy savings flowing directly to the Company’s customers.” Over 470 factories across the U.S. now make parts for wind turbines, towers, and blades, employing 30,000 people. Now nearly 70 percent of the content in a typical wind farm is made in the USA.

This is what a successful policy looks like when it’s working. The results speak for themselves: new manufacturing and construction jobs; property-tax revenue that helps rural schools and public-safety departments; income to farmers and ranchers that helps them stay on their land; diversification of our energy mix, which helps insulate consumers from spikes in fuel prices; reduced air and water pollution; and more. The case for keeping taxes low on this growing industry remains strong, and a bipartisan majority in Congress is about to get that job done.

 Peter Kelley is vice president of public affairs at the American Wind Energy Association.

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