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Wind energy tax credit going away?

Industry experts predict new projects will slow or stall. Should subsidies continue?

February 17, 2012


This morning the Chicago Tribune is reporting that the deal to renew tax credits for wind energy failed in Washington. There has been a tax credit amounting to 2.2¢ per kWh of electricity generated by wind turbines, but efforts to extend that are dead for the moment and probably won’t be resurrected until after the election, if at all. If I understand it correctly, the credit will continue for turbines that are operating now or in operation by the end of 2012, which means projects underway will need to be finished before then. It will be a very busy summer, but projects that are too far out could be scrubbed.

The article is particularly interesting in that it makes the point that new energy generating technologies take a long time to go mainstream and become self supporting, on the order of 15 to 30 years. There are historical precedents that most technologies have been subsidized to some extent in their respective day. If you go back far enough, say 1918, even the oil and gas industry started receiving major government support. Those subsidies continued well into the 1940’s, and if you convert everything to current dollars, at rates much higher than biofuels or renewables have received.

The energy technology that got the most by far is nuclear. That began in 1947 and peaked around 1960-61 when the industry received (in current dollars) more than $6 billion annually. Renewables, including wind, get about $1 billion today.

Projections suggest that if the tax credit stops, new capacity added in 2013 will drop to between 2,000 and 4,000 MW, down from 10,000 MW in 2012. Existing turbines will continue turning of course, but if new construction drops to that level there will be corresponding business closings, layoffs, etc. There are efforts in the works to extend the tax credit as its own legislation. If you want to see this pan out one way or another, now would be a good time to express your opinion to your relevant legislators.

Watch a video about wind turbine gearbox building.