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Wind Energy Lobby Willing to Phase Out Tax Credit

In an unusual move a trade group, the American Wind Energy Association (AWEA), said it is willing to accept a gradual phase-out of a major tax incentive.

In a letter to Capitol Hill lawmakers dated December 12, AWEA CEO Denise Bode said her group could accept a six-year phase-out of the Production Tax Credit (PTC).

AWEA envisions keeping the tax credit at the current 2.2 cents per KWH for projects started in 2013, and be phased down to 90% of that value for projects placed in service in 2014; 80% in 2015; 70% in 2016; and 60% in both 2017 and 2018, ending after that.

"We're already showing we're a leader in innovation. Now we're showing we're a leader in addressing the country's fiscal issues," Bode said in a news release. "At the same time, our number one priority right now is not putting the wind industry over its own fiscal cliff.”

Bode restated the AWEA position that unless the tax credit is extended to projects that start next year “an entire U.S. manufacturing sector” and 37,000 jobs could be put at risk. Bode also noted that the Senate Finance Committee endorsed PTC extension on Aug. 2, on a bipartisan 19-5 vote.

Earlier this year AWEA kicked out one of its member generators, Exelon (NYSE: EXC) after it publicly called for an end to the PTC, saying the wind industry can now survive without it.

Wind power installation in the U.S. exceeded the 50,000 MW level this summer, AWEA reported earlier this year.

Sen. Lisa Murkowski, R-Alaska, the top Republican on the Senate Energy and Natural Resources Committee has said she would favor a gradual phase-out of the PTC.

In the letter, AWEA makes a plug for some other type of congressional support for renewable power, which it does not specify.

“In coordination with any phase down of the credit, we would urge Congress to consider additional policy mechanisms to encourage a diverse portfolio that includes renewable energy,” Bode said in the letter.

Bode lauds success of wind tax credit

As for Bode, she credits the PTC for succeeding in helping spark $15.5bn a year in private investment in U.S. wind farms over the past five years. Phasing out the PTC gradually, rather than abruptly, makes sense.

AWEA announced the policy position following analysis and high-level discussions with industry leaders. The move was approved by the AWEA board of directors, Bode noted.

AWEA sent its letter to Sen. Max Baucus, D-Mont, Chairman of the Senate Finance Committee; Sen. Orrin Hatch, R-Utah, ranking Republican on that committee; Rep. Dave Camp, R-Mich, Chairman of the House Ways and Means Committee; and Rep. Sander Levin, D-Mich., ranking Democrat on that committee. Copied are House Speaker John Boehner, R-Ohio, and Minority Leader Nancy Pelosi, D-Calif; and Senate Majority Leader Harry Reid, D-Nev., and Minority Leader Mitch McConnell, R-Ky.

The letter says in part, "The wind industry recognizes that our country is facing significant fiscal challenges and is supportive of all energy technology incentives being reviewed and even phased down when Congress considers tax reform. However, the PTC has supported the wind industry in its efforts to significantly reduce the cost of producing electricity, and its continued availability for a reasonable period of time will allow the industry to invest in the cost-saving technologies required to finish the job."

Bode said that the letter addresses separate parallel conversations that have been going on between the industry and Capitol Hill, about extending the PTC in the short term, and the vision for the long-term future of the PTC.

"With the policy certainty that accompanies a stable extension," the letter says, "the industry believes it can achieve the greater economies of scale and technology improvements that it needs to become cost-competitive without the PTC,” AWEA said in the letter.

Wayne Barber is Chief Analyst, Power Generation, for GenerationHub, a unit of Energy Central

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