How do the revised rules in the Bipartisan Budget Act of 2015 affect you and your business?
“The dark clouds cleared and we have a ray of sunshine,´ said Michael Rucker, chief executive of Boulder-based juwi Wind LLC. “We have an industry again.”
The production tax credit provides an income tax credit of 2.2 cents per kilowatt-hour for the production of electricity from utility-scale wind turbines. The industry relies on the credit to keep wind-energy cost competitive with fossil fuels while the companies grow, technology improves and wind gains a foothold in electricity production.
Sponsor Generated Content
“We need that time to finance a project, procure the construction contracts and begin work,” Rucker explained. “With that construction ‘tail’ we can complete work in 2014. That tail is a very important detail; without it – had it just been a pure one-year extension, it would have achieved nothing for the industry.”
“It takes a long time from start to finish,´ said Margaret McCall, field associate for Denver-based advocacy group Environment Colorado. “The fact that this was grandfathered in is very encouraging.”
“Extending the wind Production Tax Credit is a long-overdue dose of certainty for manufacturers who employ more than 5,000 Coloradans and 60,000 workers across America,´ said Sen. Mark Udall, D-Colo., who delivered 27 speeches on the Senate floor in 2012 outlining the positive economic impact of the wind-energy industry. “Although this deal is not perfect, I am glad my colleagues have acknowledged what I have spoken about regularly on the Senate floor: Wind energy creates jobs and benefits every American. I look forward to continuing to lead the fight for our wind industry and an all-of-the-above energy policy in 2013.”
Citing a report from Navigant Consulting, Rucker told the Business Report last fall that the consequences of letting the credit expire would have cost more than 37,000 jobs in the United States, including 6,000 in Colorado.
Juwi Wind is the Boulder-based North American subsidiary of the juwi Group, an international company that designs, builds and finances wind farms. It employs 20 people in Boulder.
Extension of the production tax credit “at least allows us to function,” Rucker said. “It’s a bit of stability as we look for longer-term solutions to incorporate wind into our energy mix.”
Uncertainty about whether the tax credit would be extended had forced cutbacks by much of the wind-energy industry in 2012. Turbine-parts manufacturing plants across the nation laid off thousands of workers and developers put new projects on hold.
On Oct. 3, Vestas Wind Systems AS (CO: VWS) announced it was consolidating three research and development offices, including one in Louisville, to one site in Brighton. Vestas also has large manufacturing plants in Colorado.
“We can’t speculate on future employment levels at our U.S. factories,´ said Andrew Longeteig, spokesman for North American Vestas, adding that the company “has maintained a flexible workforce and will be able to scale production to meet customer orders with deliveries from our U.S. factories.”
Approval of the extension is “really good news for Vestas, because the American market and how it develops is extremely important,” Vestas chief marketing officer Morten Alback told Bloomberg News today. Vestas now expects higher orders for turbines this year than would have happened without the credit’s extension, Alback said, adding that it’s “too early” to predict exact numbers.
In a statement, Vestas noted that the short-term extension is critical to ensure projects move forward and orders are placed that “will support U.S. manufacturing and the domestic supply chain. Even though the late timing of the extension will result in a significant reduction in 2013 installations relative to prior years due to the time it takes from when an order is placed to project completion, the U.S. market will nonetheless be stronger as a result of the PTC extension.”
Like Udall, Sen. Michael Bennet, D-Colo., has been a supporter of the tax credit – including adding an amendment for the extension to a transportation bill in February – but was one of eight senators voting against the fiscal-cliff deal.
“While I do support many of the items in this proposal – for example, extending unemployment insurance, the wind production tax credit and tax cuts for most Americans – I believe they should have come in the context of a comprehensive deficit reduction package,´ said Bennet in a press statement. “Without a serious mechanism to reduce the debt, I cannot support this bill.”
However, Bennet has been “100 percent on our side” about wind energy, McCall said, “and we wanted to thank him.
“President Obama and clean-energy champions including Sen. Udall and Sen. Bennet, as well as Congresswoman (Diana) DeGette, Congressman (Jared) Polis, and Congressman (Ed) Perlmutter helped make this a happy holiday for our health and our environment by extending critical tax credits for wind energy,” she said in a press statement. “Wind powers nearly 13 million homes across the country already, and in Colorado avoids as much global warming pollution as taking 525,000 cars off the road each year. Our current national wind energy capacity also reduces air pollution by avoiding 137,000 pounds of smog-forming emissions and 91,000 pounds of soot-forming emissions every year. We applaud our leaders for recognizing these tremendous benefits to our health and environment, and for acting to ensure the continued development of pollution-free wind energy.”
Challenges remain as the wind industry recovers from the period of uncertainty, Rucker said. “The fundamentals are still weak, demand is low, and we need utility buyers.”