Climate Law Update: Climate Change & Sustainable Energy News : Thelen Reid Law Firm : Renewable Energy, Construction, Project Finance Lawyers & Attorneys

It showed not only how far the nation had come, but also the distance yet to be traveled to reach the 20 percent objective. For instance, the document reports that the United States has had the fastest-growing wind market worldwide and that it has led the world in new wind capacity for three years running.

In all, the country had nearly 17,000 megawatts of wind capacity at the end of 2007, up more than 5,300 megawatts. On the other hand, even with that growth -- a 46 percent jump in a single year -- it still represented just 1.2 percent of the country's electricity supply.

For individual states, the percentages were higher, however. Under a formula used by the report, nine states had enough wind capacity to account for more than 3 percent of their in-state generation. Topping the list were Minnesota and Iowa, where wind power accounted for 7.5 percent of each state's generation. Texas, the nation's top wind power state in terms of its total capacity, accounted for 3 percent while California, number two in the nation, came in at 2.8 percent. 

Overall, Texas easily dominated the other states in terms of new wind projects, installing more than 1,700 megawatts of turbines in 2007. Other states installing more than 400 megawatts each included Colorado, Illinois, Oregon and Minnesota. California, by contrast, had a relatively puny 63 megawatts installed. But that might change in the future as the result of new contracts such as one Climate Law Update recently highlighted.   

The report also documented economic ripple effects from the boom in wind energy development. It found that new turbine and component manufacturing facilities that were opened last year could account for as many as 4,700 new jobs. On the other hand, the report documented some quality control problems that surfaced as certain companies rapidly scaled up their operations.

GE remained the dominant manufacturer of turbines in the United States market, followed by Vestas, Siemens, Gamesa, Mitsubishi and Suzlon.

Turbine prices themselves have also increased dramatically -- by about 85 percent since 2002 -- according to the report. It attributed the spike to several factors, including the declining value of the dollar, increases in costs of materials such as steel and oil, shortages in some components, and moves by manufacturers to increase their profitability. Nevertheless, the report said that "wind power prices have been competitive with wholesale power market prices over the past few years."

One familiar cloud remained on the horizon, the future of tax incentives for renewable energy, including wind. Less than two weeks ago, House lawmakers made another attempt to get something going on the subject of tax credits for wind and other alternative energy sources, but its future remains uncertain. The importance of the tax incentives, the report said, was shown by the fact that there were "pronounced lulls" in adding new capacity during years when the "production tax credit," equal to about 2-cents per kilowatt hour, lapsed. Without an "imminent extension," the document said, the industry "may experience another quiet year" in 2009.

Another perennial obstacle to renewables, transmission capacity, showed some sign of easing with new expenditures on the rise. However, the report noted that "lack of transmission availability remains a primary barrier to wind development."

The report also found that state policies were important. For instance, it noted that 55 percent of the wind power capacity built between 1999 and 2007 was in states that had renewables portfolio standards requiring their utilities to purchase a certain percentage of power from renewable sources. In 2007, the proportion of new wind capacity going into states with such requirements was more than 75 percent, the report said.

(Photo of Texas wind farm, Department of Energy National Renewable Energy Laboratory; Credit: Todd Spink)        

Bush, however, on Tuesday ripped the bill for not doing enough to cut subsidies for wealthy farmers:

"The bill Congress is now considering would fail to eliminate subsidy payments to multi-millionaire farmers. America's farm economy is thriving, the value of farmland is skyrocketing, and this is the right time to reform our nation's farm policies by reducing unnecessary subsidies. It's not the time to ask American families who are already paying more in the check-out line to pay more in subsidies for wealthy farmers. Congress can reform our farm programs, and should, by passing a fiscally responsible bill that treats our farmers fairly, and does not impose new burdens on American taxpayers." 

Whether Bush's remarks were enough to derail the bill was a matter of some debate. Mary Kay Thatcher, a lobbyist for the American Farm Bureau Federation told Bloomberg she believed the chances of a presidential veto were about 30 percent (see story here).    

Meanwhile, some critics of subsidies for corn-based ethanol weren't persuaded by the bill's cut in subsidies.

"I guess you could say [it] is a step in the right direction but it certainly does not go far enough," Scott Openshaw, communications director for the Grocery Manufacturers Association, told Climate Law Update Tuesday.  The trade group represents the food, beverage and consumer products industries and has pushed for an elimination of corn-to-ethanol subsidies, believing they contribute to higher commodity prices.

"We kind of feel like it's bad to take your lunch and put it in your car," Openshaw said. However, he praised the legislation's support for cellulosic ethanol, which is made from non-food plant material.

A spokesman for the Renewable Fuels Association, representing the ethanol industry, could not be reached for comment Tuesday. The organization has vocally defended ethanol, including that made from corn, from charges it is contributing to skyrocketing food prices and other global ills(see recent RFA background statement here; see Climate Law Update story here).

(White House photo: President Bush at April 29 news conference)

Unlike the House bill, a spokeswoman for Cantwell said the Senate legislation contains no reduction in tax breaks for petroleum production to pay for the renewable incentives, a provision that some had predicted would doom the lower chamber’s bill (see Climate Law Update story). However, that leaves it unclear how the estimated $6 billion in tax incentives would be funded.

“We're looking at a lot of different options about how to get it paid for," Ciaran Clayton, communications director for Cantwell, told Climate Law Update. She declined to be more specific. 

Renewable energy proponents have been pushing hard for an extension of the tax inducements, which expire at the end of this year, arguing a lapse could jeopardize tens of thousands of megawatts of new projects, billions of dollars in investments and more than 100,000 jobs (see Climate Law Update story). The number of years to extend the credits has been an issue, with Cantwell herself previously advocating that the renewable production tax credit be extended to 2013.

The Senate bill would extend for one year an income tax credit for the production of electricity from renewable sources such as wind, geothermal, biomass and hydro. That would allow the credit to apply to facilities placed in production through 2009. The House-passed measure would extend that deadline to 2011. Both bills also would stretch the 30 percent business investment tax credit for solar and fuel cell projects through 2016.

The Senate bill also extends other incentives, including tax credits for residential solar and energy efficiency improvements, and a program under which public utilities can issue bonds for renewable energy projects.

A coalition of renewable energy groups and large and small businesses and environmental organizations also sent a letter to senators Thursday urging passage "as soon as possible" of legislation extending tax credits for "energy efficiency and renewable energy technologies and consumer purchases of energy efficient products." The remarkably eclectic list of signers included such names as the Natural Resources Defense Council, the Dow Chemical Company, Duke Energy, Edison Electric Institute, American Council on Renewable Energy, The Home Depot Inc. and the Coalition on the Environment and Jewish Life (see text of letter). 

Despite such diverse support, efforts to keep the credits on track have narrowly failed. In early February, the Senate fell one vote short of defeating a filibuster blocking an amendment to an economic stimulus bill that included an extension of renewable incentives.

"We're just looking for that one last vote," said Clayton, Cantwell's spokeswoman. She said backers were hoping to move the bill "quickly, and also gain momentum and support for it." 

Ensign, in an apparent reference to the decision to leave the oil industry untouched, stressed the need to move forward (see full statement):

“We have an opportunity to break the stalemate in the Senate. Especially at a time when our economy is struggling, we should not be increasing taxes to pay for incentives. These incentives are necessary for our energy security and to help jumpstart our economy.”

An advocate for the solar industry immediately backed the new legislation. Rhone Resch, president of the Solar Energy Industries Association, called the bill “a much-needed shot in the arm for our ailing national economy” and he pledged to work with the lawmakers for a long-term extension of the investment tax credit (see full statement).

 (Photograph of U.S. Sen. Maria Cantwell, D-Washington, via Wikipedia)

The new law directs the Washington Department of Ecology to come up with plans for reaching the targets by Dec. 1. It also sets specific benchmarks for reducing vehicle miles traveled in the state, with an ultimate goal of cutting the figure in half by 2050. Additionally, it directs the state to try to develop 25,000 green sector jobs through a variety of means, including new or expanded incentives. The legislation also tells state officials to work with the Western Climate Initiative, a multi-state effort, to reduce emissions across the West. The initiative is currently working on a design for a market mechanism, such as a cap-and-trade system, to be in place by late this summer.  

Gregoire, in her statement at the time she signed the bill, touted what she viewed as its economic potential:

“This is another example of Washington leading the way on climate change by being clean, green and competitive. Because we are acting now, we will capitalize on unique and exciting economic opportunities and increase our competitive edge in the world economy.”

Oregon’s new legislation, signed by Gov. Ted Kulongoski, allows tax credits of up to $40 million, and it also seeks to expand the state’s green economy. It includes provisions that would force officials to reduce or eliminate tax incentives under certain circumstances, including a determination that a business was unlikely to base a decision to locate to the state because of the credits, if a facility won’t produce a lot of new jobs, or if the state's revenues fall below certain benchmarks. (See Kulongoski’s announcement of the bill signing and full text and a staff analysis of the measure, House Bill 3619.)

The South Dakota legislation exempts wind energy facilities with a capacity of five megawatts or more from all state and local property taxes, replacing the revenue with a $3-per-kilowatt tax on capacity plus 2 percent of gross receipts. Developers can also get substantial rebates on transmission and other facilities serving the wind projects amounting to up to 90 percent of the taxes paid for the first five years. South Dakota Gov. Mike Rounds signed the bill earlier this month. (See Rounds’ bill signing announcement and the full text of the legislation, House Bill 1320.)  

(Above: Gov. Chris Gregoire, official portrait)       

In its letter, ACORE argued that extension of the credits would help prevent the cancellation of 42,000 megawatts of renewable projects in 45 states. That's the equivalent of 75 base load electrical generating stations, the organization contended.

Although the incentives are not due to expire until the end of 2008, their champions believe the credits must be renewed earlier than that in order to spur investment. ACORE's letter, carrying 350 signatures of industry leaders, called for Congress to act before March 1:

"A wide, bi-partisan, majority of policy-makers and economic experts agree that tax incentives are absolutely critical to long-term investment and expansion of renewable energy sources in this country, and their absence will have dire immediate consequences to the businesses in this sector in the year 2008."

Other sectors of the industry have also weighed in to pressure lawmakers. The American Wind Energy Association is asking for Congress to extend the production tax credit in the first quarter of 2008. Any further delay, the association warned, and "the impacts on wind industry investment will escalate dramatically as the financial community responds to growing uncertainty as to the future availability" of the credit. The wind group and another organization, the Solar Energy Industries Association, released a consultant's report that predicted a loss of tax credits could threaten $19 billion in investments and 116,000 jobs, with the biggest employment losses hitting California and Texas.

Politicians from some of the states have also thrown their weight behind the effort. California Gov. Arnold Schwarzenegger, in a letter to congressional leaders late last year, called the tax credits critical to renewable energy development:

"California and other states cannot succeed in developing solar projects without the tax incentives until the industry has reached a critical scale of production and deployment and can compete with traditional utility energy services. Companies who invested this year in equipment and personnel to meet the growth in demand stemming from the programs we are undertaking in California are now faced with uncertainty and potential bankruptcy."

Nevertheless, attempts to keep the credits on track have just narrowly failed. In early February, the Senate fell short by one vote of defeating a filibuster blocking an amendment to the economic stimulus bill that included an extension of the production tax credit.

The San Jose Mercury News reported that new efforts are underway, however, including plans by House Speaker Nancy Pelosi to soon bring up a renewable-energy bill. According to the paper, that bill "includes the extension of tax credits through 2011 for facilities that adopt many renewable-energy systems, at an estimated cost of $6.5 billion over 10 years. Solar energy and fuel-cell energy use would qualify for a 30 percent investment tax credit through 2016." It also would include tax credits for cellulosic ethanol, biodiesel production, plug-in hybrid vehicles and energy-efficient improvements to homes and businesses.

But the paper noted that not everyone would be happy:

The loss of revenue in the bill would be offset by a controversial rollback of $13.5 billion in tax deductions oil companies would take for domestic production over 10 years. Oil companies, with the support of the Bush administration, argued that amounted to a tax increase and were able to block a similar measure in the Senate.

(Photo of King Mountain project in Texas courtesy DOE/NREL, credit Todd Spink).