Will Congress Take the Wind out of Our Sails? | Catalyst Fall 2012
By Elliott Negin and Steve Clemmer
In 2004, Colorado voters approved a referendum for a new renewable electricity standard (RES) requiring local utilities to obtain 10 percent of their power from the wind, sun, or other clean energy sources by 2015. That victory occurred largely because UCS and others saw its passage as a precedent-setting opportunity to demonstrate growing public support for clean energy; we believed success in Colorado would boost the chances for passing similar initiatives in other states and increase congressional support for national clean energy policy.
UCS mobilized support for the Colorado initiative, evaluating and publicizing the standard’s benefits. And after its adoption, we worked with allies in the state to push legislators to raise the standard twice more. Today, the state’s target is 30 percent by 2020, and the standard has proven an unqualified success—especially when it comes to wind.
When the referendum passed, wind provided just 0.5 percent of the state’s total electricity; by the end of 2011, it provided more than 9 percent—1,805 megawatts (MW), or enough to power nearly 500,000 typical homes and keep 3.5 million tons of heat-trapping carbon emissions out of the atmosphere each year, according to the American Wind Energy Association. Wind energy expansion generated as many as 5,000 jobs in Colorado and attracted leading equipment manufacturers such as Vestas, which now has three facilities in the state employing 1,600 people.
Renewables Buck the Recession
Success stories like Colorado’s are happening across the country. Over the past five years, wind capacity has tripled to more than 50,000 MW—enough to power nearly 13 million homes and retire 44 typical coal-fired power plants. Particularly exciting is the fact that since 2005, the percentage of U.S.-manufactured components for wind turbines has jumped from 35 percent to 67 percent, keeping some 500 factories in 44 states humming. All told, the U.S. wind industry employed 75,000 people as of late 2011.
The U.S. solar industry is growing as well. Last year, it installed a record 1,855 MW of photovoltaic panels—more than twice the total of the previous year, according to the Solar Energy Industries Association—and that torrid pace continued in the first half of 2012. The United States now has 5,700 MW of installed solar capacity, enough to power more than 940,000 households, and the solar workforce has more than doubled since 2009 to more than 100,000 people at more than 5,600 businesses across the country.
Technological advances have helped facilitate renewable energy’s spectacular expansion in the midst of the Great Recession, but the main driver has been clean energy policy. State renewable electricity standards have provided a long-term market for development, and federal tax credits have allowed renewable energy to better compete with fossil fuels and nuclear power. Yet despite this remarkable success, the future of renewables, especially wind, is in jeopardy.
Growth Stalls Ahead of a Key Deadline
Unlike many fossil fuel and nuclear power subsidies that are permanent, renewable energy incentives must be renewed every few years. The federal solar tax credit, for example, will stay in place through 2016—and there is bound to be a fight over it then—but the wind production tax credit (PTC) expires at the end of this year, and its prospects for renewal are in doubt.
The PTC is critical to the relatively young wind industry because it helps developers secure financing for new facilities and sign power purchase agreements with utilities. If Congress fails to renew the PTC, investment in wind projects could drop 65 percent, from $15.6 billion in 2012 to $5.5 billion in 2013, forcing developers to install only 2,400 MW of wind capacity in 2013—less than a quarter of what is expected this year—and lay off nearly half its workforce (some 37,000 people).
With all the uncertainty surrounding the PTC’s fate, layoffs have already begun. In August, Vestas cut approximately 120 jobs in Colorado and Clipper Windpower cut 174 jobs, mostly in Iowa. A month later, Siemens Energy announced plans to lay off 615 employees—37 percent of its U.S. staff—at its wind facilities in Iowa and Kansas and its headquarters in Florida.
In early August, the Senate Finance Committee voted 19-5 to extend the PTC for one year; the extension had bipartisan support in the committee and is supported by Pat Roberts (R-KS) and Chuck Grassley (R-IA). A similar bill in the House has 80 co-sponsors, including 18 Republicans. The extension even has the support of organizations that have opposed federal action on climate change, including the National Association of Manufacturers and the U.S. Chamber of Commerce.
So what’s holding it up? Despite the fact that the wind industry has contributed at least $60 billion to the national economy since 2005, House leaders say they are concerned about the cost of $3 billion to $4 billion a year in tax credits. The most vocal opponents of the PTC, including several groups funded by the oil industry’s billionaire brothers Charles and David Koch, argue that the government is playing favorites by granting the wind industry the tax credit. In early September, Koch-backed Americans for Prosperity and other groups sent a letter to Congress opposing the extension, arguing that it “continues the deplorable practice of using the tax code to favor certain groups over others.”
Neither the House leadership nor the Koch-affiliated groups, however, question the fact that fossil fuels and nuclear power have been feasting on federal subsidies for decades while renewables have been living on scraps. For example:
- The oil and gas industry has received an average of $4.86 billion in subsidies (in today’s dollars) every year for nearly 100 years—from 1918 to 2009
- The nuclear industry—which would not be economically viable without government support—received an average of $3.5 billion every year from 1947 to 1999, and continues to benefit from similar amounts of support today
- Coal received between $3.2 billion and $5.4 billion in 2008 alone, while renewables averaged only $370 million a year between 1994 and 2009
Time to Level the Playing Field
The question is not whether energy production should be subsidized. The federal government clearly has a role to play in helping promising technologies compete in the marketplace. The question is whether the government should continue to underwrite extremely profitable, mature industries—especially highly polluting ones—at the expense of cleaner, more efficient, low-carbon alternatives. The obvious answer is no.
Excluding hydropower, renewable energy currently accounts for only about 5 percent of U.S. electricity, but UCS research shows it has the potential to generate more than 40 percent by 2030, with as much as half coming from wind. That would replace the share currently generated by coal, which is responsible for more than 80 percent of the U.S. electricity sector’s carbon emissions.
Extending the PTC now, and enacting a national renewable electricity standard in the near future, would go a long way toward protecting us from the worst consequences of global warming and bolster the economy at the same time. Continuing with business as usual, on the other hand, would waste taxpayer dollars while threatening our health and environment for generations to come.
Elliott Negin is director of news and commentary at UCS. Steve Clemmer is director of research and analysis in the UCS Climate and Energy Program.
Learn more about renewable energy technologies, and how UCS is helping to shape clean energy solutions