In a setback for wind energy producers, the U.S. Senate rejected a proposal to grant a five-year extension to the controversial wind production tax credit.
By a margin of 51-47, the Senate on January 29 defeated an amendment by Sen. Heidi Heitkamp (D–ND) to bring what she called “certainty” to the wind industry. Heitkamp attempted to attach her amendment to the Senate bill approving construction of the Keystone XL pipeline.
The federal subsidy to wind-energy producers expired along with numerous other tax breaks at the end of 2013, but it was retroactively extended through 2014 in the Cromnibus budget bill passed in December. Now the PTC has lapsed again, except for projects underway by the end of 2014. Heitkamp, whose state is home to eight wind facilities with another under construction and another proposed, wanted the longer extension as a way to give the heavily subsidized industry a breather from what has become an annual battle over the PTC.
Democrats overwhelmingly supported the Heitkamp amendment, with Sen. Joe Manchin (D-WV) being the only Democrat to vote against it. Most Republicans opposed the subsidy, though GOP senators from wind-rich states, such as Colorado’s Cory Gardner, Illinois’ Mark Kirk, Iowa’s Charles Grassley, and South Dakota’s John Thune have been outspoken supporters of wind power. Unlike Grassley, Kirk, and Susan Collins (R-ME), however, Gardner and Thune did not support Heitkamp’s five-year extension.
Decades of Subsidies
Designed to promote wind power as part of a strategy to boost use of renewable energy, the PTC provides wind power producers a tax credit of 2.2 cents per kilowatt-hour of electricity generated. What began as a temporary helping hand to enable wind power to compete with traditional sources of energy had become a permanent fixture of the wind industry’s business model. The PTC has faced expiration seven times since its enactment in 1992, only to be extended continually by Congress under pressure by the wind industry and supporters of renewable energy.
The PTC was preceded by two other federal subsidies to help launch the wind industry. Congress and the Carter administration included wind subsidies in the Public Utility Regulatory Policy Act (PURPA) and the Energy Tax Act, both enacted in 1978. When these earlier subsidies failed to make the industry competitive, Congress added the PTC as a “temporary” tax credit in 1992.
In addition to the PTC, the wind industry is buttressed by renewable energy mandates (REM) in 29 states and the District of Columbia. They require a specific amount of electricity be produced from renewable energy by a particular date. The state mandates have virtually guaranteed a designated market share to producers of renewable energy, mostly wind and solar. However, concerns about rising electricity prices have prompted Ohio to freeze its REM and West Virginia to cancel its mandate.
‘Safety in Numbers’ Strategy
The defeat of the Heitkamp amendment may lead supporters of the PTC in the House and Senate to seek “safety in numbers.” Instead of risking another standalone vote on the PTC, congressional proponents could bundle it with other expired special interest “tax extenders” and tax credits. Another option floated recently is an agreement to extend the PTC while phasing it out over a set number of years.
“Sen. Heitkamp is looking for ‘certainty’ for the wind industry. After more than 20 years of American taxpayers propping up this one industry, it is time for it to stand on its own, whereupon it will certainly fall,” said Marita Noon, executive director of New Mexico-based Energy Makes America Great.
“As the recent bankruptcy filing of Minwind makes clear, without subsidies, wind energy projects cannot survive,” Noon added. “No wonder wind industry lobbyists are pushing so hard to get the PTC extended. Fiscal conservatives want it ended once and for all, which will give both sides what they want. The industry will get ‘certainty,’ and taxpayer dollars will no longer go to billionaires like Warren Buffet who benefit from the tax breaks.”
Bonner R. Cohen, Ph. D. ([email protected]), is a senior fellow at the National Center for Public Policy Research.