Developers in the wind industry got some good news for the new year as Congress extended a key tax credit for electricity generated by wind.
A bill to deal with the so-called “fiscal cliff” also included a one-year extension of the wind production tax credit until Dec. 31. The incentive gives producers a 2.2 cent per kilowatt hour tax credit.
The Senate passed the bill early Tuesday, while the House passed it Tuesday night. One member of Oklahoma's congressional delegation, Rep. James Lankford, R-Oklahoma City, voted against the bill. President Barack Obama was expected to sign the measure but didn't say when.
Uncertainty over the future of the tax credit stalled new wind developments in the second half of 2012. Meanwhile, developers scrambled to put existing projects into service before the end of the year to qualify for the credit. Among those making the deadline were the Chisholm View project near Enid, the Canadian Hills development west of Oklahoma City and Oklahoma State University's Cowboy wind farm near Blackwell.
State capacity grows
Oklahoma now has more than 2,900 megawatts of wind-generating capacity across the state, said Kylah McNabb, wind development specialist with the state Commerce Department. That's up from 1,500 megawatts in 2010. One megawatt can power about 250 homes.
The one-year extension of the tax credit will be helpful for stalled projects, McNabb said. It also changes the timing of the tax credit. Projects now just have to be under construction by the end of year.
The older credit required wind turbines to be generating electricity by the deadline.
“I think I would still expect a conservative approach to development this year,” McNabb said. “I think the change in the language allowing construction to start in 2013 offers a wealth of opportunity. I think you will see more projects go online than with the traditional wording of the tax credit.”
McNabb said because of the tax credit's uncertainty in 2012, the supply chain for components might take some time to replenish. The one-year extension, while helpful, may not bring back some manufacturing jobs that were lost as the developments were put on hold.
“As far as future development, I still think that's unknown as far as new projects coming on and being acquired,” McNabb said.
“I think you're going to see projects that are advanced and mature in the project development pipeline have a much greater chance of moving forward and being brought online this year.”
Steve Wolfgram, vice president of Competitive Power Ventures Inc., said many in the wind industry were hoping to see some long-term certainty. His company developed the OU Spirit Wind Farm, now owned by OG&E, and the Keenan II wind farm near Woodward.
“It's unlikely that many people will start new developments in 2013,” Wolfgram said. “But the other side is that many companies have developments that they have time invested in and they're going to all try to turn those into power contracts or other opportunities to sell from those sites and get them into construction. That's going to be a challenge, but this is good news. It's a help, but it's not a long-term solution.”
Extension of the wind production tax credit is expected to cost $445 million in fiscal year 2014 and $882 million in 2015, according to Congress' Joint Committee on Taxation. The 10-year cost of the extension is expected to be almost $12.2 billion.
The tax credit spurs annual private investment in wind energy of about $15.5 billion, said Ellen Carey, spokeswoman for the Washington-based American Wind Energy Association.
After spending much of 2012 asking Congress for a long-term extension of the tax credit, the association said in December a phaseout could give the industry some certainty. The American Wind Energy Association proposed continuing the credit at 100 percent for 2013. It would then fall by 10 percentage points each year until it hits 60 percent in 2017 and 2018. The credit would end in 2019.
While it didn't get a long-term renewal or a phaseout, association officials praised Tuesday's deal.
“Now we can continue to provide America with more clean, affordable, homegrown energy, and keep growing a new manufacturing sector that's now making nearly 70 percent of our wind turbines in the U.S.A.,” Rob Gramlich, the association's interim CEO, said in a statement.
Brian Alford, spokesman for Oklahoma Gas and Electric Co., said the utility was pleased to see the tax credit renewed. OG&E owns or purchases power from eight wind farms and has more than 800 megawatts of wind capacity.
“Wind energy has been and continues to be an important part of our state's energy industry,” Alford said. “This will help ensure long-term viability of wind.”
Alford said OG&E has no immediate plans to add wind capacity to its generating portfolio.
“It's about making the right decisions for our customers,” Alford said.