When Congress barely averted driving the country over the fiscal cliff, it also renewed the wind-production tax credit, much to the joy of the wind industry and its employees, who feared losing this valuable asset. An American Wind Energy Association press release said wind provides between 6,000 and 7,000 jobs, and a concurrent release by the U.S Energy Information Administration said approximately 20 percent of Iowa’s electricity comes from wind power.
Wind energy is great for Iowa’s economy, but parts of the subsidy that fueled much of the wind industry’s growth — the wind-production tax credit, which gives an income tax credit of 2.2 cents per kilowatt-hour for electricity produced from turbines to electric companies — are creating uncertainty for this emerging sector, slowing its potential growth and hurting both workers and the industry itself.
The tax credit usually comes up for renewal variably, making it unclear how long it will remain intact, causing some companies such as Clipper Wind Power in Cedar Rapids to lay off workers because electric companies and turbine manufacturers don’t know how long they’ll have this valuable subsidy.
This created a boom and bust cycle that has lasted for about a decade; a study by Navigant Consulting predicted that if the credit expired, wind-manufacturing jobs would fall by 33.33 percent.
Andrew Kusiak, a University of Iowa professor of industrial engineering who studies wind energy, said the lack of clarity in the latest version of the credit slows the industry’s growth.
Adding to the industry’s troubles, it says a project must begin in 2013 to be subsidized but says nothing about the date of completion, Kusiak said.
This uncertainty, he said, makes businesses in the wind industry more reluctant to expand their operations because that involves greater risk. The wind tax credit offsets the risk and cost of investing in wind instead of fossil fuels.
Preventable ambiguity in the credit’s legislation holds back the wind industry from reaching its full potential. If Congress put the credit up for renewal less often and made its outline more specific for how the tax credit works, the wind industry could expand with less unnecessary concern about the future, creating more jobs and increasing economic growth.
