Should wind tax credit stay or go?

I recently responded to a question on the National Journal blog, "Should Congress extend the production tax credit for wind energy or let it expire at year's end?"

You can read more on the original blog post and other responses here.

Here is my response:

Yes, for the time being.

The production tax credit (PTC) has played a critical role in building the U.S. wind energy industry, offering clean electricity and jobs, and positioning U.S. manufacturers for a growing global market. It is well worth continuing for the time being, particularly at a moment when plentiful natural gas threatens to discourage investment in wind energy and other renewables.

One of the keys to clean, reliable, affordable electricity is maintaining a diverse supply.  Indeed, rather than competitors, wind and natural gas should be viewed as important complements, helping to balance price and supply.

Energy subsidies have played an important part in America’s economic success, fostering growth in the coal, oil, natural gas and nuclear power industries. In fact, Department of Energy subsidies for horizontal drilling and associated technologies have led to the current production boom in the natural gas industry.

Today, we face a new challenge. Our economy still needs plenty of electricity, but we must ensure that this electricity is cleaner than in the past. The electricity sector is responsible for about one third of all U.S. greenhouse gas emissions. Rising global emissions are driving climate change, and the consequences are here and now.

The PTC and renewable energy mandates in 31 states and the District of Columbia have been a powerful combination. Wind has gone from being practically no part of U.S. electricity generation to about 3 percent in the past 10 years. The United States now has more than 50 gigawatts (50,000 megawatts) of installed wind capacity, the equivalent of 50 large coal plants.

First enacted in 1992, The PTC has led to increased production and manufacturing advances. Economies of scale, improved efficiency and a diverse supply of global manufacturers have made wind power more affordable.

According to the American Wind Energy Association (AWEA), U.S. domestic production of wind turbine components has grown twelvefold over the last six years. With more than 400 facilities in 43 states, wind energy is part of the rebound in domestic manufacturing that is one of the few bright spots in a weak economy. In 2011, there were more than 70,000 wind jobs, and this is projected to grow to more than 90,000 jobs in the next five years if the PTC is extended through 2016.

Much of America’s wind potential remains untapped.  Wind resources are abundant in the Great Plains, Iowa, Minnesota, along the spine of Appalachian Mountains, in the Western Mountains and many offshore locations. The National Renewable Energy Laboratory’s just-released “Renewable Electricity Futures Study” projects that renewable energy resources could supply as much as 80 percent of total U.S. electricity in 2050, with wind turbines supplying nearly one third of our total power demands.

The tax credit has achieved many of its original aims, but with uncertainty around its renewal, that progress is faltering. There is little in the way of planned wind farm development for 2013. AWEA projects that as many as 37,000 wind industry jobs will be lost if the tax credit is not extended.

With China moving aggressively to dominate the global clean energy market, now is the time to  build on this investment in manufacturing infrastructure, not cede ground. But wind farm developers need the price certainty provided by the PTC.

Continued support is especially critical in the midst of a natural gas boom that threatens to squeeze renewables out of the market. If our goal is a clean, affordable, reliable electricity supply, wind and natural gas both have important roles to play.  In fact, they complement each other nicely. Natural gas power plants can serve as an effective hedge against wind’s natural intermittency. And wind farms are an effective hedge against the price volatility we’ve historically seen with natural gas.

No subsidy should last forever. Indeed, many subsidies enjoyed by other fuels should have been ended long ago. 

Congress should extend the production tax credit, but at the same time establish an independent commission to review the full gamut of U.S. subsidies for all energy sources and recommend clear criteria and timelines for phasing out those that are no longer necessary. We must be judicious in our use of taxpayer subsides, and right now, continuing the PTC is a wise investment.

Eileen Claussen is president of C2ES