Congress fills sails of wind energy, for nowShort-term tax credit extension welcomed, but long-term extension wanted.
By: Chris Mueller, The Daily Republic
As long as the wind is blowing and the turbines are spinning, South Dakota’s wind industry seems poised to stay on course — for at least another year, anyway.
A one-year extension of the wind industry’s federal production tax credit was passed last week by the House of Representatives as part of the deal meant to prevent the country from falling off the “fiscal cliff.”
“This will help us get by one more year,” said Rob Rebenitsch , executive director of the South Dakota Wind Energy Association.
The wind industry’s tax credit, which Rebenitsch called “critical,” was set to expire at the end of 2012. That left developers scrambling to finish ongoing projects before the cut-off and delaying future projects.
“The extension came late,” Rebenitsch said. “As a result, the wind industry is going through a boom and bust cycle.”
The last-minute extension, while better than nothing, is still only a “stop-gap measure,” Rebenitsch said, and developers will want a long-term policy to provide stability to the industry before investing millions of dollars in new projects.
It’s anyone guess as to when, or if, such a long-term policy will be established.
“Looking at history, I have to be very cautious about any projections for stability,” Rebenitsch said.
Other industry impacts
The tax credit pays developers 2.2 cents per kilowatt-hour, which, according to Rebenitsch , can account for nearly one-third of the funding for an average project. The tax credit is one leg of a three-legged stool supporting the wind industry, he said, with the other two legs being demand for energy and the ability to deliver energy to consumers.
“Business needs certainty,” said South Dakota Public Utilities Commission Chairman Chris Nelson. “And today, in this political environment, there is no certainty.”
The PUC is focused on bringing consumers in South Dakota the cheapest possible energy, Nelson said.
“If that’s wind energy, great,” he said. “If it’s something else, great.”
Economic factors, such as the stalled growth in electrical demand and the unusually low cost of natural gas, have also affected the wind industry. Nationwide demand for electricity historically increases 2 to 3 percent per year, but actually declined during the recession, Rebenitsch said at the South Dakota Wind Energy Association’s 2012 Membership Meeting, held Nov. 29 at Mitchell Technical Institute. Demand has now started to recover.
South Dakota’s existing wind energy production capacity is 784 megawatts. That represents $1.5 billion in investments. In 2012, about 10,000 megawatts of wind power was installed in the U.S., representing about 40 percent of all new generation.
“We expect a much, much lower pace of installation in 2013,” Rebenitsch said.
Any wind project started before the end of the year will qualify for the tax credit, a change from 2012 when projects needed to be completed by years’ end to qualify. The change is seen as good news for Mitchell Technical Institute’s wind turbine technology program.
“It’s going to start an increase in demand for our students again,” said MTI President Greg Von Wald.
Von Wald is also the vice president of the South Dakota Wind Energy Association.
Though some of MTI’s students are discouraged by the wind industry’s uncertain future, Von Wald is quick to point out there are still jobs to be found. Because so many wind turbines have been put up in recent years, there is “tremendous demand” for people trained in turbine operation and maintenance, Von Wald said.
The most immediate impact of the tax credit’s extension in South Dakota will be for those people still employed at the wind industry’s manufacturing plants, Nelson said.
“I think what everybody is looking for is some certainty,” he said.
In Howard, a town with one operational wind plant, Broadwind Services, and another that has been empty since shutting down in 2010, Knight & Carver Wind Group, the tax credit’s extension is a welcome relief.
“I think the wind industry would have taken quite a hit if it hadn’t been renewed,” said Pat Maroney, a Howard resident and business owner. “Especially new development.”
Maroney is on the board of directors for Howard’s Rural Learning Center, an economic development group largely responsible for bringing the wind industry to Howard. He is also the namesake for Maroney Commons, a $6.5 million hotel, restaurant and conference center in downtown Howard. The facility closed in September, barely a year after it opened, for financial reasons including the loss of wind-industry training programs.
The tax credit’s extension will certainly help Broadwind stay in business, Maroney said, and will hopefully spur more development in the future.
“It can only be viewed as a positive for wind energy in general,” he said.