Battle Over Wind Subsidy Leaves Industry Bruised
The battle to get Congress to renew the wind-energy production tax credit before year’s end strained relationships among utilities, splintered support within the industry’s biggest trade group, and is setting up the industry—and its supporters in Congress—for a 2013 even more contentious than 2012.
Many utilities, environmental groups, and lawmakers from both parties are cheering the news that the production tax credit was extended by one year as part of the fiscal cliff deal. But the bruising fight over the last year doesn’t bode well for the sector as it must now agree on how to ramp down the tax subsidy that was first created 21 years ago.
Xcel Energy, which is among the top 10 biggest utilities in the country and had the largest wind capacity of any utility in 2011, is reviewing its membership in American Wind Energy Association largely because of how the trade group handled the tax credit debate. A final decision from the company is expected soon about what, if anything, it plans to do.
"We are in the process of reviewing our relationship with AWEA,” Xcel lobbyist John O’Donnell told NJ. “It's our concern that they continue to represent the interests of developers to the exclusion of customers."
O’Donnell is referring to both individual households and businesses whose electricity bills from utilities are affected by the production tax credit either directly or indirectly. O’Donnell doesn’t think extending the PTC, which is a tax credit that goes to wind-energy developers, benefits customers paying electricity bills or the utilities buying wind from renewable-energy generators. He went so far to say that because Congress extended the PTC without any additional policies to benefit customers, the Minnesota-based Xcel may not buy more wind.
"As the largest provider of wind to customers by far, we feel this action doesn’t do nearly enough for customers, and throws into immediate question any further plans we have to buy more wind on their behalf,” O’Donnell said.
Another bruise from last year’s fight that will wear on into 2013 is lobbying by Exelon, the country’s biggest nuclear generator, to eliminate the PTC altogether. The Chicago-based Exelon, which is also the 11th-ranked utility in terms of wind generation, has aggressively lobbied lawmakers to end right away the tax credit because the policy distorts electricity market prices and hurts the company’s bottom line.
Exelon spent $6.4 million on lobbying through October (fourth-quarter lobbying numbers are due out later this month). In response to Exelon’s lobbying push, which was first reported by National Journal in August, AWEA kicked the company out of its group in September. Exelon is going to keep up its push against the policy now that Congress renewed it.
“In the coming months Exelon will work with legislators to inform them of the unintended negative consequences to power markets and investments in other sources of generation from the continuation of the PTC,” Exelon lobbyist David Brown told National Journal in an e-mail.
The lobbying power of Exelon, whose position against the PTC aligns the company with deep-pocketed conservative tea-party groups like Americans for Prosperity and the American Energy Alliance, could be even more concerning to the wind industry moving forward.
“Most people supportive of renewable energy are concerned about all the money they’re putting into this,” said one wind-energy lobbyist who would speak on the condition of anonymity only. “The renewable energy and wind energy specifically need to come up with a much better defense and push back…You’re going to see industry hit back harder now.”
But for now, AWEA is regrouping. Amid internal claims that the group’s leadership on the PTC was lacking, its CEO and president of the past four years, Denise Bode, announced last month she was resigning to return to the private sector as a tax attorney. AWEA’s top lobbyist, Rob Gramlich, will serve as interim CEO as the group finds a new one.
AWEA spent $1.81 million on lobbying through October, which is much less than Exelon and a $1 million less than NextEra Energy, the biggest renewable-energy generator that was the most outspoken company supporting the PTC. NextEra, whose lobbyists have clashed with Exelon executives over the PTC, did not immediately have a comment in response to this article.
AWEA has publicly announced it supports phasing out the tax credit, but consensus within the industry doesn’t exist (yet) about how and for how long that should happen.
Sen. Mark Udall, D-Colo., who is the most outspoken supporter of the policy in Congress and gave almost 30 floor speeches on the issue over the last several months, said he remains committed on a way forward.
“I plan on pushing my colleagues this year to pursue a multiyear extension in conjunction with a well-crafted phase-out,” Udall said to National Journal. “Such a phase-out would need to provide market certainty, and I believe that is the direction we need to head.”
Toward the end of last year, Xcel lobbied lawmakers on a proposal that would have replaced the production tax credit with a combination of an investment tax credit and a customer renewable credit.
The investment tax credit would be given to renewable-energy developers to help finance projects, and the customer renewable credit would be awarded to utilities that integrate more wind and solar onto the grid in order to incentivize such renewable-energy integration. The two credits combined would cost the government between $6 billion and $7 billion over 10 years. The one-year extension will cost taxpayers about $12 billion over 10 years.
“There is some merit to that,” said the wind-energy lobbyist about Xcel’s proposal. “Maybe that is a way to compromise and get utilities more supportive of tax credits for renewable energy.”
Udall expressed initial support for the proposal last month, but at that point he—and all other congressional wind backers—was focused chiefly on extending the PTC.
Another big problem lurking in the background for the wind industry is what, if any, legislative vehicle they can use to advance their proposal, if and when the industry can agree on a way forward. But that’s a fight for another day.