GOP: It’s probably about time to look into this dodgy wind-credit business
posted at 3:21 pm on February 13, 2013 by Erika Johnsen
To follow on the heels of Ed’s SOTU fact-check, President Obama pedaled yet another deliberately misleading fact last night that happens to be a mega-pet peeve of mine (emphasis added):
We have doubled the distance our cars will go on a gallon of gas and the amount of renewable energy we generate from sources like wind and solar, with tens of thousands of good, American jobs to show for it. We produce more natural gas than ever before, and nearly everyone’s energy bill is lower because of it. And over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen. But for the sake of our children and our future, we must do more to combat climate change. …
Now, four years ago, other countries dominated the clean-energy market and the jobs that came with it. And we’ve begun to change that. Last year, wind energy added nearly half of all new power capacity in America. So let’s generate even more. Solar energy gets cheaper by the year. Let’s drive down costs even further. As long as countries like China keep going all-in on clean energy, so must we.
Why yes, the wind industry did boast a good chunk of new power capacity in 2012 — sounds awesome! Wind must be doing pretty well, right? …Except that everyone in the wind industry was afraid they were going to lose the highly generous wind production tax credit on which they are shamefully dependent, and were rushing around like chickens with their heads cut off to get their projects started so they could get grandfathered in to the credit’s benefits. As the NYT reported at the close of last year:
All over the country, developers are in a sprint to get new wind farms up and running before Tuesday, when two subsidies will disappear like Cinderella’s ball gown. After that, the nation’s wind-farm building will be at a virtual standstill.
The stakes of meeting the deadline are enormous. Wind turbines that are connected to the grid and in commercial service before midnight on New Year’s Eve are entitled to a 2.2 cent tax credit for each kilowatt-hour they generate in their first 10 years, which comes out to about $1 million for a big turbine. Or companies can request a lump-sum payment equal to 30 percent of the construction cost.
As it stands now, those that enter service on Jan. 1 or later are out of luck.
But the lavish credit did get extended, in the form of a one-year extension added in to the last-minute fiscal-cliff package — although the language on exactly what stages of wind projects will qualify was rather squishy, as the House GOP hasn’t failed to notice. Via The Hill:
Congress, with a strong push from the White House, extended the credit for one year in the January deal to avoid the “fiscal cliff.” The renewal included an alteration that allowed wind projects to collect the credit if developers commence construction by 2014, rather than turbines beginning to produce power by that deadline. …
“There’s no clarification yet as to what under construction means … We are going to look at that as a committee because that is undefined area that in the hands of a regulator and we want to be sure we bring some clarity to that,” said Lankford, who chairs the House Oversight and Government Reform Committee’s Energy Policy, Health Care and Entitlements Subcommittee.
The Treasury Department and IRS are currently evaluating how to interpret the credit’s language. Some experts say the threshold for beginning construction is when developers invest 5 percent of the project cost, while others say physical activities must be under way.
Some conservative lawmakers say the tweak will expand the program and the federal deficit, noting the one-year extension would cost $12.1 billion through 10 years.
And what is it that we are meant to spend $12.1 billion on? One of the most expensive and unreliable forms of electricity available, that’s what. From Real Clear Energy:
Bloomberg New Energy Finance has released its annual volume, Sustainable Energy Factbook, published January 31. Included is the chart above, which compares the levelized costs for 24 different technologies for generating electricity. …
What drives up the levelized cost of wind and solar is their low capacity factor, generally around 20 percent for solar and 30 percent for wind. Despite their “nameplate capacity” – the figure usually quoted in the press – wind and solar facilities are usually generating electricity only 20 to 30 percent of the time. This increases their levelized costs by a factor of 3 to 5 times. Capacity factor also affects large and small hydro, since many dams must be operated on a seasonal basis due to rainfall patterns and fish migrations.