SPRINGFIELD — The scheduled expiration of the federal tax credit that has supported wind energy for almost 20 years could leave Illinois struggling to meet renewable energy requirements.
By Anthony Brino
SPRINGFIELD — The federal tax credit that has supported wind energy for almost 20 years is set to expire at the end of 2012.
With this expiration looming, the future of the industry in Illinois — one of the top producers of wind energy in the nation — could leave the state struggling to meet its renewable energy requirements, even as the state exports more wind energy than it uses.
With 1,500 turbines in operation and about the same number in permitting stages, Illinois’s wind industry also has thrived because of an electric grid ideal for carrying power into Chicago and exporting it to Midwestern and Eastern states and the state’s renewable-energy requirements.
Illinois is one of 33 states that has passed renewable energy requirements. By 2025, 25 percent of Illinois’s electricity has to come from sources such as solar, wind and biomass; 75 percent of that must come from wind.
In 2011, Illinois became the fourth largest wind-producing state in the country, according to a January report from the American Wind Energy Association, a national trade group.
In 1992, Congress offered wind companies a federal tax credit, now worth 2.2 cents per kilowatt hour of electricity generated and lasts for 10 years. Illinois’ wind generators can produce as much as 2.4 million kilowatts, worth as much as $52,000 a day.
But Matt Aldeman, senior energy analyst with Illinois State University’s Center for Renewable Energy, which studies new sources of energy and the markets to sell them, said it is not “that often” that Illinois’ wind farms generate the maximum 2.4 million kilowatts.
“It might be windy in one part of the state, but not windy in another part,” Aldeman said. Which is why, he added, it is difficult to come up with average energy production and tax credit figures.
For Stefan Noe, wind energy is a worthy investment.
“It does make up a good percentage of the economics of a wind projects,” said Noe, president of Midwest Wind Energy, a wind developer based in Chicago that is building the Big Sky wind farm in Bureau and Lee Counties, which is expected to generate enough electricity to power 125,000 houses.
But Illinois is just one state where Midwest Wind Energy has wind farms. The company also has wind farms in Wisconsin, Iowa and Nebraska, and sells power throughout the Midwest.
“The wind industry has become able to compete even with coal, thanks to the tax credit and falling turbine prices,” Noe said.
More companies are producing wind turbines, which leads to lower prices as does a drop in the price for many of the parts used to make the giant blades and generators.
Noe said he’s “cautiously optimistic” that the tax credit will be renewed, as it has been almost every year since 1993. And as long as wind turbines are in the ground before the end of the year, the companies will qualify for the credit.
Even so, the industry is lobbying hard for its renewal; the American Renewable Energy Production Tax Credit Extension Act, a bill in the U.S. House of Representatives, would extend it for four years.
“We’re not asking to be a permanent part of the tax code,” said Ellen Carey, a spokeswoman for the American Wind Energy Association. “Wind is on track (to) contribute 20 percent of the nation’s electricity by 2030. We’re just saying, let us finish the job.”
Kevin Borgia, executive director of the Illinois Wind Energy Association, a nonprofit industry trade group, said he is optimistic that the credit will be renewed.
But without the credit, Borgia said, “investment isn’t attractive, new development will grind to a halt and the thousands of American manufacturing jobs the industry supports will wane.”
In Illinois, dozens of companies, many of them headquartered in Europe or Asia, manufacture parts such as turbines and gearboxes for the state’s and country’s wind industry. Aside from the manufacturing jobs in the supply chain, the industry has created more than 13,000 temporary construction jobs and about 600 long-term maintenance jobs, according to the Illinois State University Center for Renewable Energy, a research and outreach nonprofit.
NTN Bearings, a Japanese company that makes bearings for heavy machinery, including wind turbines, has considered expanding its McComb plant to serve U.S. markets, said spokesman Joe Kahn.
“With the uncertainty over the production tax , it’s difficult to make a business case for capital expansion,” Kahn said of the McComb plant, which employs about 400 people and primarily makes bearings for agricultural and construction machinery.
A study released in December by the economic research firm Navigant projected that an end to the tax credit would likely lead to loss of 37,000 wind industry jobs nationwide. Extending the credit, according to Navigant, would create 17,000 jobs over the next several years.
More than jobs, though, Borgia and Noe, president of Midwest Wind Energy, said the expiration of the tax credit could make it hard for Illinois to meet its renewable energy regulations of getting 18.75 percent of its electricity from wind by 2025.
“With the federal tax credit, the cost of compliance with the (requirement) is low. Without (it), the cost increases dramatically, raising rates for consumers,” Borgia said.
Only a few Illinois wind farms have long-term agreements to sell to Illinois’ major electricity providers, Ameren Illinois and Commonwealth Edison LLC, said Borgia.
Between September 2010 and 2011, 4 percent of Ameren’s electricity came from wind, said Ameren spokesman Leigh Morris.
During that same time period, only 1 percent of ComEd’s electricity came from wind, according to the company’s most recent disclosures.
Wind generates about 7 percent of the state’s electricity, enough to power about 500,000 to 1 million homes, said David Loomis, director of the Center for Renewable Energy, a nonprofit that does research and outreach on renewable energy. That’s projected to double over the next five to 10 years, Loomis said.
Most of the wind electricity generated in Illinois is exported to states on the East Coast such as New York and Massachusetts to help meet their renewable energy requirements. Or they sell to the “merchant” market to any utility that needs to buy power on any given day, whether in Illinois or elsewhere. The specific amounts of those exports aren’t public information.
Arlene Juracek, acting director of the Illinois Power Agency, which buys contracts for ComEd and Ameren, is optimistic Illinois will meet its renewable energy requirements, while also allowing companies to continue exporting most of that wind energy.
“Wind has proven to be a cost-effective resource, and we’re on track to grow the industry,” said Juracek.
Blowing in the wind
""Wind has proven to be a cost-effective resource, and we're on track to grow the industry," said Juracek."
Cost effective?
Then why whine about loss of the tax credit? Any tax credit decreases tax revenue and that means taxpayers have to make up the difference. They are paying for it directly or indirectly.
Wind turbines need rare earths and minerals, but even though we have as much as China, EPA rules limit extraction and production here. Thus we are dependent on Chinese exports. That gives them a competitive advantage. So much for cost effective permanent "green"jobs.
BTW did anyone consider that money is also a scarce resource?
Read the review of the movie "Windfall" in Friday's WSJ by John Anderson.
IL benefits from wind power
I sure hope Congress renews the tax credit for wind power. It is clear from the article that IL is benefiting from the nation's investment in wind. A lot of good paying jobs here in IL, and in the US are depending on the credit, and a lot more will come if it is extended for a few years.
A large majority of Americans say they support renewable energy, and feel the government should invest more in renewable energy. Of course "investing" in renewables costs something…2.2cents/kwh (tax credit) in this case…
For me the question isn't should the government spend our money, the question is what should the government spend our money on. I'd much prefer the government spend (invest really) some of my tax dollars here at home on helping the US become energy independent (promoting sustainable energy sources), in an environmentally responsible way, rather than "blowing" billions (trillions even!) invading and occupying countries in the mid-east.
Ending the wind tax credit won't mean the government stops spending money, it just means the government will spend that money on something else (or that the rich investors put their money into a different tax shelter), something that is unlikely to be generating power "cost effectively" in ten years and even less likely to be generating power for "free" in twenty or thirty years. (By "free" I mean free of carbon pollution and free of government support–obviously people will still pay for the power they use in the future.)
IL and beyond benefits from wind power
1. All of the major forms of energy production in the US receive tax credits in some form, including to a very degree fossil fuels and nuclear. It would be great to have those forms of energy, which are mature industries, to give up their tax benefits. However, their lobbying power is incredible. The main reason for renewable energy tax credits is to establish their emerging markets.
2. If all we cared about is lowest initial cost, we would be using only coal unless there was a compelling regional reason to use something else, like hydro in the Northwest. I don't think there are too many people out there thinking we should be only using coal for power generation.
3. The big part missing from the discussion about pricing in the cost of the externalities such as climate change, national defense issues, general pollution, impacts to human and habit health, etc.
4. There is tremendous research going on for offshore (and land based) wind. The use of rare earth magnets is a relatively minor component of the assembly, and its use is likely to be significantly reduced or eliminated with advancing technologies such as super conducting gear box designs.
5. Money is in fact a scarce resource. That is why it is important to transition to renewable energy systems now and not wait until their is zero money left to do this. Keeping 19th century technology around so a few large corporations can continue to profit at the expense of the environment, people's health, the U.S.'s economic growth and national security is about as anti-American as it gets.