This document provides background information and summarizes the debate over a tax credit for companies producing wind energy. The links to the left will lead you to public documents that we have found.
Ever since the
energy crisis of the 1970s there have been repeated calls for the United States
to rely more on renewable energy sources and less on fossil fuels. Whenever
oil prices go up or instability emerges in the Middle East, America's dependence
on foreign supplies becomes glaringly obvious. Periodically policymakers have
created tax incentives to try to spur investment in or consumption of renewable
energy. One example is a tax credit that was created for installing solar
panels; another is the recently enacted credit for purchasing hybrid cars.
The tax credit
for wind energy was intended to encourage investment in wind farms. Such "farms"
are groups of windmills that use the motion of the blades propelled by the
wind to move energy through turbines onto power lines. These power lines are
connected to central power plants that, in turn, distribute the energy to
residential and commercial developers. In principle, everyone is in favor
of wind energy since it is clean energy. Sometimes those abutting proposed
wind farms will object but this has not proven to be a major obstacle.
Those in the industry
have convinced Congress that investment must be subsidized if more wind farms
are to be developed. Proponents point to substantial progress in making wind
farms viable. Said one industry lobbyist, "since the tax credit was enacted
in 1992, wind energy has gone from 22 cents to 4 ½ cents a kilowatt
hour. It's a clear case of government-private partnership actually working,
and making it not just reasonable but feasible." The most recent renewal
of the tax credit was for only two years, leaving the industry frustrated
as it believed investors need a longer-term commitment before they're willing
to put up capital. In the 107th Congress an effort was initiated to get Congress
to renew again, this time for five years.
Led by the American
Wind Energy Association and individual power companies, a coalition of supporters
approached the tax writing committees to try to find a suitable vehicle. For
its part the Bush administration was much more interested in promoting exploration
and development of oil and gas fields. Its omnibus energy bill included various
incentives for these traditional energy producers and lobbied Congress hard
to open up the Arctic National Wildlife Refuge (ANWR) on that state's northern
tier for oil exploration. The administration gave lip service support to renewable
energy but there was no major push for these clean fuels because they remain
small sources in our overall energy picture.
Nevertheless,
the administration was not working against renewable energy and proponents
searched for a suitable bill that it's congressional supporters could use
to move a new wind energy credit through the House and Senate. The proposed
wind energy incentive would cost $1 billion over five years, not a trivial
amount of money. Said one lobbyist, "Opposition is people that want the
some pot of money, that's where you get into problems with anything. The Congress
is like a sand box with some . . . toys in it and there's not quite enough
toys to go around to all the kids." The wind energy industry ultimately
succeeded in getting a five year tax credit put into the omnibus energy bill,
a major victory. The energy bill failed, however, to clear the Congress. Thus
is was back to work for the wind energy lobbyists at the beginning of the
108th Congress.