News Column

Longer Tax Credit Favored by Wind Industry

Jan. 7, 2013

LeAnn Eckroth, The Bismarck Tribune

windmills

Congress has extended a federal tax credit for wind power by one year. Yet, companies making wind energy parts and pushing the wind projects in North Dakota had already felt the delayed decision's impact this fall. It was part of the congressional action to thwart the federal "fiscal cliff."

The Production Tax Credit was scheduled to end in 2012 until Congress continued it through the end of 2013. It helps grow the use of renewable energy sources in the country through a 2.2-cents-per-kilowatt tax credit for wind energy created.

Department of Commerce officials said it will take months for those building wind turbine parts to recover.

Mike Fladeland, manager of energy business development for the Commerce Department, said before companies can expand their inventory for wind towers, they need demand for the parts, wind power customers and developers willing to build wind farms.

"It could be three to six months to build inventory back up for manufacturers," Fladeland said.

"The wind power producers in the state are limited by the available transmission and market for power," he said. He said companies that make the components for wind towers and farms won't build up their inventories without orders from developers.

Fladeland said wind farm developers here may have delayed making offers to users. With the tax credit continuing, "developers could offer a better price to a customer with the tax credit," Fladeland said. "Developers held off because they generally did not know if they would have lower rates because of the uncertainty of the PTC."

Fladeland said he was not aware of any specific projects delayed because of the energy tax break policy.

Without the extension, "the developers would have had to increase the price for their wind-generated power, making them non-competitive in the market," Fladeland said.

Wind blade maker LM Wind Power of Grand Forks laid off 345 workers in late November -- 200 full-time workers, 15 administrative staff and 130 temporary and workers and contractors. Another 270 workers remained after the layoffs.

Messages were left for LM Wind Power officials by phone and email Friday afternoon, but company officials did not respond.

DMI, which made wind tower parts in the state, was sold and is no longer in the wind industry, Fladeland said.

"The extension makes new wind projects eligible for the tax credit," he said.

Aaron Severn, director of federal legislative affairs for the American Wind Energy Association, said extending the PTC signifies the industry "needs to get back to work."

Nationally, Severn said, 4,000 people were laid off in the wind industry in the country because it was unknown if the tax break would continue. "Without the extension, 37,000 jobs would have been lost if it had not been extended," he said.

Severn said a number of people in the wind industry "had to hit pause button" until the tax credit was decided. The newer version of the tax credit allows projects that started in 2013 to receive the incentive once they are operating. The tax incentive has been available since 1992, he said.

"It will provide more jobs because more (wind) businesses are certain the policy is in place," Severn said.

Severn said the wind industry will eventually become self-sustaining. "It will not need a tax credit forever," he said.

Severn said government policy has supported other industries in the past. "We're still in the phase of catching up with the other energy industries as far as government policy," Severn said.

He said wind industry costs have come down 90 percent since the 1980s. "Nearly 75 percent of the wind turbines produced are in the United States. It was 25 percent in 2005," Severn said.

Severn said the "outlook is good" for the industry. He said there may have been a record number of wind projects installed in 2012 because of the uncertainty of the tax credit.

"The real benefit (of the tax credit) is it will continue to diversify energy sources in the country," he said.



Source: (c)2013 The Bismarck Tribune (Bismarck, N.D.) Distributed by MCT Information Services