Wind Energy Hung Out to Dry

The head of the American Wind Energy Association once was asked why Congress dribbles out one- and two-year extensions of renewable energy tax credits, rather than grant long-term extensions that would give wind and other renewable energy developers the financial certainty that they need to ramp up projects to the scale needed to take a substantial bite out of greenhouse gas emissions.

If you have to ask that question, he replied with a sadder but wiser edge to his voice, you’re not acquainted with the bizarre peculiarities of DC budget politics. Perhaps it’s best not to know.

Wind energy in the U.S. is having its best year ever. Wind generating capacity now exceeds 18,000 megawatts, and nearly 6,000 megawatts are under construction.

That’s only the beginning of what could be a long wind energy boom. The U.S. Department of Energy recently put out a technical report estimating that wind energy could supply 20 percent of the nation’s power supply over the next three decades. That could chop the electricity sector’s carbon dioxide emissions 25 percent by 2030 – a significant down payment on necessary emissions reduction goals.

Progress could come to a screeching halt, however, when the clock strikes 12 on New Year’s Eve. That’s when the production tax credit for which wind and certain other renewables are eligible turns into a pumpkin. If that happens, look for wind development to crash in 2009.

It’s happened before. Wind energy projects require a high up-front investment. Lining up the financing is difficult when developers and their bankers can’t be sure about the economics of a project when tax credits pop in and out of existence like virtual particles. Three times in the past decade, the credit has expired, causing wind development the following year to plunge between 73 and 93 percent.

And this is no time for a lot of guff about wind energy getting subsidies. Every form of energy gets subsidies. The key question is which subsidies make sense for achieving important public purposes, such as cutting greenhouse gas emissions and cleaning up the air.

The House has passed a bill extending the tax credits. The bill’s fate in the Senate is up in the air.

The smarter thing to do, however, would be to extend the credits for at least five years. If Congress is worried about offsetting the revenue impact, well, setting priorities is part of the job description. Climate change, along with the energy security and economic risk issues associated with high fossil fuel dependence, ought to rate as high priorities.