Senators Chuck Grassley (R-Iowa), Jim Jeffords (R-Vt.), and Kent Conrad (D-N.D.) helped set the stage for what is expected to be a strong effort to extend the federal wind energy production tax credit (PTC), introducing legislation (S. 530) March 14 to extend the credit for five years.  S. 530 joins a companion bill (H.R. 876) introduced in the House of Representatives a week earlier.

Jaime Steve, Director of Legislative Affairs for the American Wind Energy Association (AWEA), said wind companies and advocates will be pressing the case for the incentive actively, with one highlight of the campaign being a week-long lobbying blitz on Capitol Hill in conjunction with AWEA's national conference, Windpower 2001, in Washington, D.C., in early June.

"The bill is called the BREEZE Act, and I hope it'll be a breeze to get it passed into law," Grassley, who chairs the powerful Senate Finance Committee, said.  "The wind is a clean, abundant natural resource.  Harnessing its power makes perfect sense, especially in times of energy shortages and soaring prices.  Wind energy is a breath of fresh air."

Other initial cosponsors of S. 530 include Senate Energy Committee Chair Frank Murkowski (R-Alaska), John Breaux (D-La.), Gordon Smith (R-Ore.), Byron Dorgan (D-N.D.), Dianne Feinstein (D-Calif.), Larry Craig (R-Ida.), Patty Murray (D-Wash.), Tim Johnson (D-S.D.), and Chuck Schumer (D-N.Y.).

"The wind industry is grateful for the support of Senator Grassley, who has championed the PTC since its inception in 1992," said Jon Chase, AWEA Assistant Director of Legislative Affairs.  "The introduction of this bill is a crucial step towards extending the wind PTC."

In the House, a bipartisan group of members from the Ways & Means Committee, which is responsible for all tax legislation, joined to back H.R. 876.  The bill was introduced March 6 by Rep. Mark Foley (R-Fla.), along with lead sponsors Reps. Jerry Weller (R-Ill.), Bob Matsui (D-Calif.), and Karen Thurman (D-Fla.).

Other original sponsors were Reps. Rob Portman (R-Ohio), Wes Watkins (R-Okla.), Jim Ramstad (R-Minn.), Jim McCrery (R-La.), E. Clay Shaw, Jr. (R-Fla.) and Scott McInnis (R-Colo.). All 10 of these members serve on the tax panel.

"The wind industry greatly appreciates the strong bipartisan leadership of Representatives Foley, Weller, Matsui and Thurman in offering this legislation," said AWEA Legislative Director Steve.  "This is a vital part of building a broad base of support for extending the credit."

The PTC provides a 1.5 cent per kWh tax credit (adjusted for inflation) for electricity produced using wind resources.  Under current law, the PTC is set to expire December 31.  The provision was first created as part of the Energy Policy Act of 1992. When extended for the first and only time in 1999, the PTC attracted support from two-thirds of the House tax committee and nearly half of the entire House of Representatives.

Growth of the Wind Energy Industry

- Total worldwide wind capacity today is approximately 17,000 MW, enough to generate about 34 billion kilowatt-hours of electricity each year.  This is about the same amount of electricity as 5 million average California households (containing 12.5 million people) use.

- Wind energy was the world's fastest-growing energy source during most of the 1990s, expanding at annual rates ranging from 25% to 35%.  In 2000, about 3,500 MW of new wind capacity (close to a $4 billion investment) was installed around the world, but only 53 MW of that total, or a little more than 1%, was installed in the U.S.  However, AWEA expects as much as 1,800 MW of new wind capacity to be installed in the U.S. this year.

- Leading states in terms of installed wind capacity as of December 2000 are California (1,646 MW), Minnesota (272 MW), Iowa (242 MW), and Texas (188 MW).

- U.S. wind potential is enormous--many times the amount installed.  California, for example, could conservatively install an estimated 5,000 MW of wind capacity.  Other western states have much larger potential--e.g., Wyoming has more than 10 times California's.  The U.S. is, quite literally, a "Saudi Arabia of wind," with vast resources throughout the Plains states.

Market Drivers Behind Wind Energy's Growth

(1) Federal government policy  The federal government provides a tax credit of 1.5 cents per kWh (adjusted for inflation) for electricity generated by a wind plant during its first 10 years of operation.  This credit is intended to "level the playing field" for wind, which must compete with other energy industries that receive billions of dollars in federal subsidies each year.  The wind energy credit will expire at the end of this year unless it is extended by Congress.

(2) State government policy  Several states, as part of electric utility restructuring legislation, have enacted policies to encourage clean energy sources like wind.  The state of Texas, for example, has passed a law requiring the construction of 2,000 MW of new renewable energy generation by the year 2009, of which wind is expected to capture a major share.  New wind projects of 160 MW, 208 MW, and 82.5 MW have been announced in Texas within the past few months.

(3) Declining costs  The cost of producing electricity from wind energy has declined by more than 80%, from about 38 cents per kilowatt-hour in the early 1980s to a current range of 3 to 6 cents/kWh (levelized over a plant's lifetime not including the federal wind energy Production Tax Credit (PTC)). However, the cost of electricity from a wind plant varies based on its size and the average wind speed.  A large plant (50 MW and up) at an excellent site (20 mph average) can deliver power for 3 cents/kWh or less; electricity from a small plant (3 MW) at a moderate site (16 mph) may cost up to 8 cents/kWh.  In the not-too-distant future, analysts believe, wind energy costs could fall even lower than most conventional energy sources, reaching an unsubsidized cost of 2.5 cents/kWh. 

Clean Energy Policy Options

(1) Renewables Portfolio Standard (RPS)  The RPS is a "minimum content requirement," which specifies that a certain minimum percentage of electric power must be generated from renewable energy sources (wind, solar, and others).  Typically, RPS legislation provides that the minimum percentage increase gradually over time to encourage the sustained, orderly development of the renewable energy industries.   Several states, including Texas, have enacted RPS laws, and the concept is also being considered by the U.S. Congress.  More information on the RPS is available from http//www.awea.org/policy/index.html#RPS .

(2) Production Tax Credit (PTC)  The U.S. government currently provides a tax credit of 1.5 cents per kilowatt-hour (adjusted for inflation) for all the electricity generated by a new wind plant during its first 10 years of operation.  Under current law, the credit is scheduled to expire at the end of 2001.  The American Wind Energy Association (AWEA) is seeking its extension for at least five years.  More information on the PTC is available from http//www.awea.org/policy/index.html#PTC.

(3) Incentives for Small Wind Turbines  Tax incentives or rebates help make the purchase of a small wind turbine for household use more attractive to potential buyers.  California currently provides a rebate of up to 50% of the purchase price of a small turbine, and that has helped to sharply increase demand for the units in the state.

(4) Disclosure of Energy Sources  AWEA also supports "disclosure" laws, which require sellers of electricity to inform customers of the sources of energy (coal, nuclear, natural gas, etc.) that are used to generate the electricity.  Such information is important for consumers to be able to make intelligent choices in a competitive marketplace.

(5) Fair Transmission Policy  The nation's electricity transmission system operates based on rules that were designed to fit the characteristics of fossil fueled power plants.  Congress should take appropriate steps (including guidance to the Federal Energy Regulatory Commission and the emerging Regional Transmission Organizations) to ensure that wind energy is not disadvantaged in the market simply because it is an intermittent power source.

Benefits of Wind Energy Development

Windy counties profit from wind development through

(1) Tax Payments Every 100 MW of wind development generates about $1 million in property tax revenue.  Development of another 2,000 MW of wind this year will mean $20 million annually in tax revenues to rural communities.

(2) Jobs  Every 100 MW of wind development creates about 500 job-years of employment.  Installation of 2,000 MW will result in 10,000 job-years.

(3) Payments to landowners The development of 2,000 MW in the U.S. will mean annual payments of approximately $4 million to farm and ranch landowners.

(4) Stable electricity prices A recent study (January, 2000) found Iowa's electric utility customers could save over $300 million over a 25-year period if a proposal to meet 10% of the state's electric demand through wind energy is adopted.  The savings result because the cost of fossil fuels is expected to rise over time, while wind's costs decline.  Savings in California, where prices have skyrocketed because of supply constraints, would be enormous.

(5) Reduced emissions of pollution and greenhouse gases A single 660-kW wind turbine will displace emissions of 1,100 tons of carbon dioxide (the leading greenhouse gas), 6 tons of sulfur dioxide (the leading component of acid rain), and 4 tons of nitrogen oxides (the leading component of smog) every year, based on the U.S. average utility fuel mix.  375 acres (more than half a square mile) of forest would be needed to absorb the same amount of CO2.

Quotation

        "Wind energy is just moving into its takeoff phase today.  This industry is positioned to provide jobs and economic development in many states across the country over the next 20 years." -- Randall Swisher, AWEA Executive Director.