In 2007, the small town of Newton, Iowa looked on the brink of collapse. The major employer of the town, the Maytag Corporation, who had headquartered their small operation and manufacturing base in the town since 1893, shut its doors. With more than 1,800 employees out of work, the town turned to the green energy sector; the sector they had been promised would provide the next wave of jobs for the American people. By the next summer, developers from TPI Composites had bought the old Maytag factory to manufacture blades for wind turbines.
Return to the present and TPI Composites, who reemployed several hundred of the displaced Maytag workers, is looking to reinvest in Iowa, modernizing its plant. But it does so in a climate of great uncertainty. The Production Tax Credit (PTC), which awards 2.2 cents to companies for every kilowatt-hour of wind energy produced for their first ten years of operation, is set to expire at the end of 2012. Last November, Iowa Gov. Terry Branstad called on federal lawmakers to quickly decide upon the program’s fate, saying failing to extend the tax credit could jeopardize Iowa’s burgeoning wind energy industry. As Operation Free begins a major effort to extend the PTC, we examine in this post how the PTC works, why it is needed, and what you can do to help.
WHAT IS THE PTC?
To understand what the PTC is, it might be important to know what the PTC is not. The PTC is not loan guarantees. The PTC is not free money. The PTC is not corporate welfare.
The Production Tax Credit is a federal tax relief program. Started in 1992 under George Herbert Walker Bush and the 102nd Congress, the program rewards wind energy companies for every kilowatt-hour produced. Despite the programs disappearance three times in the past twenty years, the PTC has been reinstituted now three times. It has become an industry-standard, allowing companies to grow and invest in the understanding of government assistance once they begin adding power to the grid.
So, what is the PTC? The PTC is “pay for production,” where companies must be successful and add energy to the grid to receive money. The PTC is capitalist, with companies responding to market conditions and incentives to produce a desirable product – between $10 and $20 billion of capital investment in the US. The PTC is a public-private co-op, in the style of some our most successful energy platforms (i.e. the Tennessee Valley Authority, the Hoover Dam, etc.). The PTC is job-creating, 75,000 worth of jobs. The PTC is clean energy. The PTC is “Made in America;” manufacturing, maintenance, transfer, and management of wind-energy jobs that stay in this country.
Essentially, the PTC is awesome.
WHY IS IT NEEDED?
As a rule, businesses like to be able to predict the market in which they live. Uncertainty deters investors and makes operating more costly. For years, the wind energy sector has been able to rely on the PTC when making investment plans for the future. Now they cannot.
As the graphic shows, when the industry can plan and rely on the PTC, the production of wind energy grows the following year; years where the future is uncertain, the industry contracts.
Of course, wind energy cannot rely on tax credits forever, or arguably they are not competitive. The American Wind Energy Association has suggested that over the next five years the PTC should be gradually reduced to half its current benefit, with some in the industry willing to be bolder and go further. But it is essential that this be a bona fide, codified glide — a projected steady drop-off over time, written into the law — rather than a complete removal of the program.
WHAT YOU CAN DO TO HELP
Join the fight. Follow the link below to sign the AWEA’s petition to extend the PTC.
http://act.awea.org/p/dia/action3/common/public/?action_KEY=10
You can also sign up with OperationFree to learn more about the Wind Production Tax Credit and to help local OperationFree events in your area.
The time to for solar and wind power is now so we can export the coal and gas rather than burning it for no reason which is the purpose it serves best
It is a very mature suggestion the American Wind Energy Association ventured forth. Undeniably, the gradual reduction of PTC is an ideal situation. However, at least according to energygridiq.com, it seems as if we are facing more abrupt cuts than ever before.
Go for that gradual decline- otherwise we are looking at a bubble collapse for not only renewable energy producers but also for the countless number of investors along for the ride.