Wind developers will need to move fast if they want to meet a year-end deadline for a federal tax credit that has been critical to the industry's growth.
The wind production tax credit has become mired in election-year politics and faces an uncertain future beyond Dec. 31, when it expires.
An extension to the credit failed last week in the U.S. Senate when it was offered as an amendment to a multiyear transportation funding bill. Several pieces of legislation remain, including a bill co-sponsored by Rep. Frank Lucas, R-Cheyenne.
The incentive allows for a 2.2 cent per kilowatt-hour tax credit for electricity generated by wind. It dates to 1992, but Congress let it expire a couple of times since then. That's contributed to a boom-and-bust cycle for the
The tax credit should amount to $1.3 billion for the 2012 fiscal year, according to estimates by Congress' Joint Committee on Tax
Wind projects can take between nine to 16 months from groundbreaking to generation. Factories producing turbines and blades remain busy for projects in the pipeline but aren't getting many new orders for 2013 because of uncertainty over the tax credit, said Matt Kaplan, associate director of the wind advisory service for IHS Emerging Energy Research.
Kaplan said political predictions are risky, but he doubts Congress will approve any extension of the tax credit before November's elections.
Nationally, about 12 gigawatts of wind generation capacity will be added this year, he said. IHS projects that will fall to 1.5 gigawatts in 2013 if the tax credit
“That's a massive decline all created by this uncertainty,” Kaplan said.
Oklahoma ranks eighth in the nation in wind-power generation and has about 1,000 megawatts of wind energy under development through the end of the year, said Kylah McNabb, wind development specialist for the state Commerce Department. Completion of those projects would bring the state to more than 3,000 megawatts generated from wind energy, she said.
In his visit to the state this week, President Barack Obama took note of Oklahoma's wind industry as an important part of the nation's portfolio of renewable energy.
“It means more wind power — which, by the way, nearly tripled here in Oklahoma over the past three years in part because of some of our policies,” Obama said Thursday at a Cushing-area pipe yard.
Jaime McAlpine, president of Edmond-based Chermac Energy Corp., said his company has about 1,500 megawatts of wind power under development in Oklahoma through 2014.
Extension of the tax credit is critical to maintain the industry's momentum, he said.
“Every day that passes without an extension is a nail in the coffin for the potential of another renewable energy source,” McAlpine said.
Critics of the tax credit say the wind power industry should be strong enough to exist without government support. McAlpine said the large, up-front capital costs for construction, equipment, leases and machinery for wind power means it's hard to find financing without the credit.
“We don't receive it until we're actually producing energy for consumers,” he said. “This credit leads to increased manufacturing and adds to energy independence. Will there be a need for it forever? I don't think so, but we need it for the short term. All energy sources have some type of incentive or credit because energy is the lifeblood of the United States.”
Meanwhile, Oklahoma Gov. Mary Fallin sent a letter to Congress last month in support of the tax credit extension.
Fallin said the wind energy sector is an “American success story.”
“As a country, we have decided to support energy diversity and development of all domestic resources, creating an ‘all of the above' energy strategy,” Fallin wrote. “The (production tax credit) plays an important role in helping to deploy technologies that ensure a diverse, domestic energy fleet.”