December 31, 2012

Wind industry: Tax breaks key

Credits due to expire unless Congress acts help stabilize the market for six Maine projects as they try to boost their output.

By Tux Turkel
Staff Writer

Maine's six major wind-energy projects are generating power at about a quarter of their capacity -- a performance level that illustrates why wind-power developers are pushing Congress to extend the tax breaks that are critical to the industry's survival.

click image to enlarge

In this July 2009 file photo, wind turbines are seen on Stetson Mountain in Washington County.

AP file photo

While that power output may seem low, it reflects regional wind conditions and technology limitations. The U.S. Department of Energy found that wind farms in New England operated at an average capacity of 28 percent in 2011, the second-lowest in the country behind the East. By comparison, the highest capacity factors are in the wind-swept Midwest, averaging 37 percent.

Capacity factor is a measure of how much electricity a turbine actually produces during a period, compared to its maximum design if the wind blew all the time. The 25 percent generation level for Maine occurred over the 12-month period ending in September, government figures show.

The sporadic nature of wind generation is a key reason the industry is pushing hard for Congress to extend a tax break that wind-farm owners receive on the amount of electricity they generate. Called the Production Tax Credit, it currently is valued at 2.2 cents per kilowatt hour.

That would translate into a total tax credit of $17.5 million over the last year for the six Maine projects, which reported a combined power generation of about 796,000 megawatt hours.

The credit was first enacted in 1992 and has been extended several times. It will expire at year's end if Congress doesn't take action. The industry says thousands of manufacturing, construction and development jobs hang in the balance.

The tax credit won't be needed forever, the industry says. This month the American Wind Energy Association sent a letter to Congressional leaders with a plan to phase out the credit over six years. That period, the letter says, would let wind energy establish a stable domestic market and make further technology innovations.

Separately, the industry notes that capacity factors have been gradually increasing over the years, as taller towers, longer blades and better turbines extract more power from the wind.

"These improvements require long-term technology investment, and the only way you get that is through certainty and stability in the market," said Elizabeth Salerno, director of industry data and analysis at the association. "We need a longer lead time to finish the job."

Maine leads New England in land-based wind energy, with roughly 400 megawatts of capacity online. That's enough to power 100,000 homes, the industry says. Building these projects has led to nearly $1 billion in investment, according to the Maine Wind Industry Initiative trade group.

But wind-power opponents say the benefits are outweighed by the sight of massive turbine towers and spinning blades on Maine's mountains, and by the sounds endured by people living next to the projects. They say taxpayers shouldn't continue to subsidize the technology, through tax credits and government policies that give wind an above-market rate for generating renewable power.

"These things don't perform," said Brad Blake, a spokesman for the Citizens' Task Force on Wind Power. "The question is, why do we have such a poor public policy that panders to a special-interest group that can't make it on its own and can't compete economically?"

Blake has been calling attention to Maine's performance data, which comes from reports that operators file with the Federal Energy Regulatory Commission. The 12-month figures were compiled for the Portland Press Herald by a financial analyst. The accuracy was confirmed by Boston-based First Wind, which owns four of the projects, and a former owner of the Record Hill wind farm, near Rumford. TransCanada Corp. didn't reply to questions about its Kibby Mountain project in western Maine.

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