The federal renewable energy production tax credit (PTC), which provides a subsidy for producers of electricity from wind energy sources, is set to expire Dec. 31, 2012. By now, you are probably aware that the U.S. Congress refused on March 15 to approve a one-year extension, and a bipartisan group promptly introduced a new bill, that same week, calling for a two-year extension. And you probably also know, based on this (and whatever transpired since) that the PTC is a political hot potato, with many Republicans calling for an end to all energy subsidies, and many Democrats calling for PTC continuation to avoid job losses. What we don’t know is where this will all end.
The PTC was born in 1992, designed to help prop up what was, at the time, a fledgling wind energy industry. Since 1992, the U.S. Congress has renewed the PTC in one-, two- and three-year increments, with the last coming in 2009. The PTC provides a $0.022/kWh credit for producers of electricity from wind energy sources. The duration of the credit is 10 years after the date the facility is placed into service.
Manufacturers of wind turbines and blades, such as Vestas, Gamesa, GE, TPI Composites and others, point to the PTC as a primary driver of wind energy development in the U.S. and want it not only extended but made permanent. Their argument is that the PTC provides a stable, business-friendly environment for wind energy development and makes wind a competitive energy source. Without the PTC, the wind energy environment will be unstable and its growth in the U.S. will slow — leading eventually to layoffs. The American Wind Energy Assn. (Washington, D.C.) says 37,000 jobs could be lost if the PTC is not renewed.
Opponents of the PTC argue that wind is not now and never will be competitive with natural gas and that not only is the subsidy a waste but Americans would save billions of dollars, as well, if wind produced no energy at all. Further, opponents argue that renewable energy sources will never provide more than a fraction of the energy required by Americans.
Whatever your politics, it is true that the PTC has stimulated wind energy growth, and this has served the composites industry well. It’s also true that the wind energy industry, sans PTC, will not wither and die. Wind energy is more cost-competitive than it used to be, and will only become more so. The problem is that the wind industry is global, and if the U.S. can’t provide a stable wind market, then China, Brazil and Germany can and will — if turbine manufacturers tire of American uncertainty, then they will pick up their toys and go play somewhere else that’s more stable.
The variable that’s most intriguing in this argument is the cost of energy. When looking at natural gas, coal, solar, hydro, nuclear and other sources, wind stacks up favorably. According to the Energy Information Admin., conventional natural gas is $66/MWh, hydro is $86/MWh, conventional coal is $95/MWh, wind is $97/MWh, advanced coal is $109 and nuclear is $114/MWh.
If you believe that it’s incumbent on us to develop multiple energy sources, it’s hard to look at the cost of wind and say that it’s unaffordable and out of reach and, therefore, not worth the investment — whether commercial or governmental.