Tax Credit in Doubt, Wind Power Industry Is Withering

[herm]

What should Obama do about this?

Diane Cardwell - NYTIMES - Sept. 20, 2012

Lets compromise, allow the tax credit only for US built windmills --Ed.

Last month, Gamesa, a major maker of wind turbines, completed the first significant order of its latest innovation: a camper-size box that can capture the energy of slow winds, potentially opening up new parts of the country to wind power.

But by the time the last of the devices, worth more than $1.25 million, was hitched to a rail car, Gamesa had all but shut down its factory here and furloughed 92 of the workers who made them.

Similar cutbacks are happening throughout the American wind sector, which includes hundreds of manufacturers, from multinationals that make giant windmills to smaller local manufacturers that supply specialty steel or bolts. In recent months, companies have announced almost 1,700 layoffs.

At its peak in 2008 and 2009, the industry employed about 85,000 people, according to the American Wind Energy Association, the industry’s principal trade group.

About 10,000 of those jobs have disappeared since, according to the association, as wind companies have been buffeted by weak demand for electricity, stiff competition from cheap natural gas and cheaper options from Asian competitors. Chinese manufacturers, who can often underprice goods because of generous state subsidies, have moved into the American market and have become an issue in the larger trade tensions between the two countries. In July, the United States Commerce Department imposed tariffs on steel turbine towers from China after finding that manufacturers had been selling them for less than the cost of production.

And now, on top of the business challenges, the industry is facing a big political problem in Washington: the Dec. 31 expiration of a federal tax credit that makes wind power more competitive with other sources of electricity.

The tax break, which costs about $1 billion a year, has been periodically renewed by Congress with support from both parties. This year, however, it has become a wedge issue in the presidential contest. President Obama has traveled to wind-heavy swing states like Iowa to tout his support for the subsidy. Mitt Romney, the Republican nominee, has said he opposes the wind credit, and that has galvanized Republicans in Congress against it, perhaps dooming any extension or at least delaying it until after the election despite a last-ditch lobbying effort from proponents this week.

Opponents argue that the industry has had long enough to wean itself from the subsidy and, with wind representing a small percentage of total electricity generation, the taxpayers’ investment has yielded an insufficient return.

“Big Wind has had extension after extension after extension,” said Benjamin Cole, a spokesman for the American Energy Alliance, a group partly financed by oil interests that has been lobbying against the credit in Washington. “The government shouldn’t be continuing to prop up industries that never seem to be able to get off their training wheels.”

But without the tax credit in place, the wind business “falls off a cliff,” said Ryan Wiser, a staff scientist at Lawrence Berkeley National Laboratory who studies the market potential of renewable electricity sources.

The industry’s precariousness was apparent a few weeks ago at the Gamesa factory, as a crew loaded the guts of the company’s newest model of the component, a device known as a nacelle, into its fiberglass shell. Only 50 completed nacelles awaited pickup in a yard once filled with three times as many, most of the production line stood idle, and shelves rated to hold 7,270 pounds of parts and equipment lay bare.

Industry executives and analysts say that the looming end of the production tax credit, which subsidizes wind power by 2.2 cents a kilowatt-hour, has made project developers skittish about investing or going forward. That reluctance has rippled through the supply chain.

On Tuesday, Siemens, the German-based turbine-maker, announced it would lay off 945 workers in Kansas, Iowa and Florida, including part-timers. Last week Katana Summit, a tower manufacturer, said it would shut down operations in Nebraska and Washington if it could not find a buyer. Vestas, the world’s largest turbine manufacturer, with operations in Colorado and Texas, recently laid off 1,400 workers globally on top of 2,300 layoffs announced earlier this year. Clipper Windpower, with manufacturing in Iowa, is reducing its staff by a third, to 376 from 550. DMI Industries, another tower producer, is planning to lay off 167 workers in Tulsa by November.

Wind industry jobs range in pay from about $30,000 a year for assemblers to almost $100,000 a year for engineers, according to the Bureau of Labor Statistics.

The industry’s contraction follows several years of sustained growth — with a few hiccups during the downturn — that has helped wind power edge closer to the cost of electricity from conventional fuels. The number of turbine manufacturers grew to nine in 2010 from just one in 2005, according to the United States International Trade Commission, while the number of component makers increased tenfold in roughly the same period to almost 400, according to the Congressional Research Service.

Aside from Clipper Windpower and General Electric, most of the turbine manufacturers operating in the United States are headquartered overseas, especially in Europe, where wind power took off first, spurred by clean energy policies and generous subsidies.

As the United States put in place mandates and subsidies of its own, several large outfits, including the Spanish company Gamesa, set up shop stateside. Because the turbines, made of roughly 8,000 parts, are so large and heavy — blades half the length of a football field, towers rising hundreds of feet in the air, motors weighing in the tons — they are difficult and expensive to transport.... [Read More]

[CRT1]

Locate foot. Point. Aim. Shoot.

[herm]

I'm sure most people would not mind paying an extra lousy 2.2 cents per kWh for green renewable power.

[worthywads]

Originally Posted by herm

I'm sure most people would not mind paying an extra lousy 2.2 cents per kWh for green renewable power.

Speak for yourself.

[waltermlee]

Originally Posted by herm

I'm sure most people would not mind paying an extra lousy 2.2 cents per kWh for green renewable power.

I am getting electricity from Clean current(CC) a wind turbine electricity consolidater at 7.8 cents per kwh via a 1 year contract which at the time of the contract renewal was 2.2 cents cheaper than buying it from my local electric company (Pepco) which uses mainly coal and nuclear power to make electricity [at the time of my CC renewal contract - the Pepco rate was matching my previous contract electricity rate from CC which was about 10.x cents per kwh] . CC electricity rate dropped from 10.x cents to 7.8 cents per kwh with the contract renewal. Pepco has since lowered its rate to 8.5 cents per kwh and next month will lower it to 8.1 cents per kwh. Still Pepco's standard residential rates won't be cheaper than than CC but the price trends of both rates seems to mirror or feed off each other.

[Prius Lover]

"Opponents argue that the industry has had long enough to wean itself from the subsidy"

Strange that the oil industry has had far longer to wean itself from the big oil government subsidy but nothing said about that?

[wick1ert]

Originally Posted by waltermlee

I am getting electricity from Clean current(CC) a wind turbine electricity consolidater at 7.8 cents per kwh via a 1 year contract which at the time of the contract renewal was 2.2 cents cheaper than buying it from my local electric company (Pepco) which uses mainly coal and nuclear power to make electricity [at the time of my CC renewal contract - the Pepco rate was matching my previous contract electricity rate from CC which was about 10.x cents per kwh] . CC electricity rate dropped from 10.x cents to 7.8 cents per kwh with the contract renewal. Pepco has since lowered its rate to 8.5 cents per kwh and next month will lower it to 8.1 cents per kwh. Still Pepco's standard residential rates won't be cheaper than than CC but the price trends of both rates seems to mirror or feed off each other.

I was going to sign up with CC, but at the time I was under a 2 yr fixed 9.9c/kwh with WGES. It was cheaper than Delmarva offered. Now, CC has pulled out of the DE market due to low customer signups. Too bad, because I'd love to go 100% from CC to supplement what my PV array doesn't cover. Maybe I'll double check and see if they're back or plan to come back to here....

[herm]

http://www.thefiscaltimes.com/Articl...gin.aspx#page1

Nuclear Attack on Wind Turbines — Energy Wars Begin

"The nation’s largest nuclear utility is leading a full court lobbying blitz to eliminate subsidies for the wind energy industry, which built 35 percent of new U.S. electricity generation capacity since 2007.

The campaign has opened a fissure between Republican presidential candidate Mitt Romney, who backs elimination of the wind production tax credit (PTC), and some moderate Republicans who represent states that have benefited from wind power’s rapid expansion. Sen. Charles Grassley, R-Iowa, whose state now gets 20 percent of its power from wind, recently likened Romney’s opposition to the PTC as “a knife in my back.”

Chicago-based Exelon Corp., which gets 92 percent of its electricity from its 17 nuclear power plants, launched the campaign after chief executive officer John Rowe retired last spring and was replaced by Chris Crane, who previously ran the company’s nuclear division. Rowe cultivated an image as “green” utility executive, supporting a carbon tax and lobbying in favor of an “all of the above” energy strategy. Under Rowe, the company also cultivated close ties with the home-grown Obama administration, which backs the PTC.

But that changed abruptly under Crane. Two weeks ago, the company, which has about 12 wind projects of its own, was thrown off the board of the American Wind Energy Association, the trade group for the industry. “They’re leading the campaign to defeat our industry’s number one priority,” said Peter Kelly, the top lobbyist for AWEA. The group says that nearly half the 75,000 new jobs created in the past five years will disappear after January 1 if the wind PTC isn’t extended.

Exelon spent $5.1 million to influence Congress in the first half of the year, giving the company a large presence on Capitol Hill. Its lobbyists have been working to eliminate the wind credits from tax legislation that will be considered during a lame duck session where Congress must deal with a host of expiring tax and spending measures, better known as the fiscal cliff.

“The wind energy PTC distorts today’s competitive wholesale electric markets, causing severe financial harm to other, more reliable clean energy sources,” Paul Elsberg, a spokesman for the firm, said in an email.

In addition to Romney, the anti-wind campaign has won some powerful backers on Capitol Hill. Sen. Lamar Alexander, R-Tenn., wrote an op-ed in The Wall Street Journal this week calling the PTC “Puff, the magic drag on the economy.” Citing a new report from Northbridge Group, consultants for large utilities, Alexander said the subsidy would cost the government $14 billion between 2009 and 2013. “Running coal and nuclear out of business is not good for the U.S. economy,” he wrote. “There is no way a country like this one – which uses 20 to 25 percent of all the electricity in the world – can operate with generators that turn only when the wind blows.”

The Tennessee Valley Authority recently signed several agreements to purchase electricity from wind producers, a spokesman for the AWEA said.
Wind proponents say wind turbines, once installed, provide a dependable source of low-cost power that will last as long as new fossil fuel or nuclear plants. Rowe, Exelon’s former boss, said in a speech to the American Enterprise Institute last year that he foresaw a future where his utility would build complexes that combined wind turbines, which turn reliably at night, daytime solar cells and natural gas turbines, which can serve as a bridge fuel when either falter. Such complexes would be less expensive and more environmentally friendly than coal or nuclear plants. Even before Obama took office, the Energy Department called for wind power to produce 20 percent of U.S. power by 2030, up from 3 percent today.

But that future is beginning to recede as uncertainty over extension of the tax subsidy ripples across the wind belt. Siemens earlier this week said it was laying off 600 workers at its wind-turbine manufacturing plants in Fort Madison, Iowa and Hutchinson, Kansas. It also announced it wouldn’t call back 330 temporary workers.

Leading installers of wind power are cutting back their plans because of the uncertainty. Florida-based NextEra Energy Resources, with 44 percent of a nationwide network of electricity generating facilities wind-powered, will invest only $505 million in new wind-generating facilities this year, down from $2 billion in 2010. The company recently told Wall Street that it has no new plans for wind investments beyond 2015.

“There’s a boom-bust cycle in our industry,” said Steve Stengel, a spokesman for NextEra. “When the PTC is in effect, there are a lot of projects. And when it lapses, very little is built.”

The PTC gives firms that own the wind turbines a tax credit of 2.2 cents per kilowatt hour. The subsidy enables wind to compete with low-cost natural gas, which in recent years was the largest new source of electricity generation, capturing 45 percent of the market. Wind is already cheaper than nuclear power, coal or other alternative energy sources like solar, the spokesman for the AWEA said.

PTC advocates say the subsidies for wind create a level playing field with the subsidies that go to other forms of energy production. Nuclear power benefits from the Price-Anderson act, which places a low limit on utility liability in the case of a nuclear accident and sharply lowers that industry’s insurance costs. The oil, coal, gas and nuclear industries receive more than three-quarters of all energy subsidies and allowances, which total about $300 billion a year, according to the Green Scissors campaign – a joint endeavor of environmental and libertarian groups."

[herm]

Originally Posted by Prius Lover

Strange that the oil industry has had far longer to wean itself from the big oil government subsidy but nothing said about that?

There really is no big oil subsidy, you have to stretch the definition (the cost of the Navy?) to claim there is one. Robert Rapier has a good article on this.

The legal immunity from nuclear incidents lawsuits that the Nuke industry gets is a huge subsidy, but it is a needed one due to our perverse legal system.

[herm]

Meanwhile back in Japan:

http://www.ft.com/intl/cms/s/0/d354f...#axzz272cslJV6

Japan floats radical ideas for energy

"Before the meltdown at the Fukushima nuclear plant last year, Takeshi Ishihara’s idea for the world’s largest floating wind farm was little more than an academic’s fancy – an expensive and risky experiment that no one wanted to fund.

Now, 18 months after the world’s second-worst nuclear accident, the Tokyo University professor has Y12.5bn ($160m) in government start-up money and partnerships with some of Japan’s biggest energy and construction companies, who will install a few test turbines not far from the Fukushima plant from 2013.

If the trials go well, Mr Ishihara wants to expand to 140 floating turbines generating 1GW of power by 2020 – close to the capacity of Fukushima’s largest reactors. “We aim to create the infrastructure for a 21st-century society,” he says.

Japan will need more projects like this if it hopes to scrap its remaining nuclear plants by the end of the 2030s, the goal of a new long-term energy strategy announced last week.

Business groups strongly oppose the plan, fearing higher energy bills and less stable supplies, and cabinet ministers responded on Wednesday by promising “flexible” implementation. The unsettled situation reflects a lack of consensus on a basic question: can Japan replace a carbon-free energy source that had accounted for almost 30 per cent of its electricity without doing catastrophic damage to its economy or the environment?

In the most basic sense, Japan is already getting by without nuclear power – it has turned off its reactors without blacking out the country. All 50 of its surviving reactors were stopped in the months after the March 2011 accident, amid wrangling between Tokyo and local governments over safety measures. Only two have been restarted.

But few believe the current situation is sustainable. Energy-saving has helped: nationwide electricity consumption declined 5 per cent in the year to March, and peak-hour usage this summer – the most demanding time for power companies – was down more than 10 per cent on 2010.

That has still left a big hole in Japan’s electricity supply, which has been filled by vastly increased use of fossil fuels. For a country with virtually no carbon reserves of its own, the strain has been severe. Utilities are paying billions of dollars more for natural gas and oil and emitting 30 per cent more greenhouse gases; Japan’s trade balance has fallen into deficit, a shock for an economy used to buoyant net exports; and a 40-year national project to reduce Japan’s dependence on foreign fuel is in tatters.

“This could be a turning point for Japan,” says Nobuo Tanaka, former executive director of the International Energy Agency, who argues for continued use of nuclear power. “The confidence of financial markets could be lost for government bonds and the yen.”

Avoiding disaster would require making recent energy savings permanent. Under the new strategy, Japan would reduce electricity consumption by 10 per cent by 2030 by investing Y84tn in low-consumption technologies and tightening already strict efficiency standards on everything from factories to appliances.

It is an ambitious target. Since the oil shocks of the 1970s, Japan has managed to keep increases in power consumption below its rate of economic growth, but achieving the absolute cuts envisaged by the plan would be a far greater challenge.

Even then, Japan would still emit more greenhouse gasses. Previously, the government had promised a 25 per cent cut in emissions compared with 1990 levels by 2020; now, it is aiming for a 5-9 per cent reduction by that date, and a 20 per cent decrease by 2030.

Developing the necessary clean-energy alternatives will not be easy. Solar and wind power, neglected amid the past focus on nuclear, together account for less than 1 per cent of total electricity generation. The strategy calls for output from these and other non-hydro renewables to increase eightfold by 2030, at an estimated investment cost of Y38tn.

Together, investment in efficiency and clean generation would amount to about a third of one year’s GDP over 20 years. That is probably affordable for a rich country like Japan, but experts say logistics could be a bigger problem given the country’s mountainous terrain and dense population.

Masakazu Toyoda, of the Institute for Energy Economics, calculates that raising solar power’s share of electricity generation to 8 per cent by 2030 would require fitting photovoltaic panels on 80 per cent of all new buildings, starting immediately, plus retrofitting 3 per cent of homes and covering 550 sq km of farmland each year.

The lack of space for onshore wind farms explains Mr Ishihara’s plan to float his out at sea – but offshore projects cost much more, even when turbines are mounted directly on the seabed. The deep waters that surround most of Japan call for even more esoteric – and pricey – adaptations.

Supporters of a nuclear withdrawal point out that the deadline is nearly three decades away, giving utilities, consumers and government lots of time to adapt. Existing nuclear plants would be restarted in the meantime, then decommissioned after 40 years of operation, so Japan would still get 15 per cent of its electricity from nuclear power at the start of the 2030s."