Once again, Congress is being warned that if they allow the Production Tax Credit for wind energy to expire at the end of 2012, it will stall the industry's growth in the US.
The Production Tax Credit has been allowed to expire three times in the past 12 years and is set to expire again in 2012.
The GOP continually emphasizes the need for "businesses to have certainty" in order for them to invest and create jobs. Perhaps this is one place where all can agree - the wind industry is vital to our present and future economy and as an emerging industry in the US, it needs stable policies. So why, as the GOP so often says, should we "raise taxes" on this industry?
The Congressional Research Service, a nonpartisan agency that provides policy research for Congress, warns in a report published this week that obstacles impeding the expansion of wind energy in the US include "the history of policy-induced boom-and-bust cycles in wind energy investment, which may lead wind turbine manufacturers and component suppliers to conclude that future U.S. demand for their products is too uncertain."
The report notes the U.S. wind industry is an expanding source of new manufacturing jobs and that its future hinges on consistent state and federal policies.
Ironically, due to the Production Tax Credit and market stability over the past five years, domestic produced wind products in the U.S. industry reached a record high of 60% through 2010, according to a recent Department of Energy (DOE) report.
In the first half of 2011, 2,151 MW of wind capacity was installed in the US, versus 1,250 MW during the same period in 2010, a rise of 72%.
But project activity and orders for 2013 and beyond are scant, because of the lack of a predictable business environment, causing layoffs and even bankruptcies in American manufacturing plants and the supply chain, says the American Wind Energy Association (AWEA).
These struggles for U.S. wind manufacturers will only worsen if Congress allows the tax credit to expire, as has happened in the past.
Other key points from the report include:
- Greater demand for wind turbines, cost savings related to transportation, and concern about the risks associated with currency fluctuations are among the reasons wind turbine and component manufacturers have opened new production facilities in the United States since 2005.
- The size of the U.S. market, notwithstanding the sharp decrease in new installed capacity in 2010, has made the US an attractive investment location for wind turbine and wind component manufacturers.
- Although turbine manufacturer supply chains are global, recent investments have raised the share of parts manufactured in the US to 50-60%, up from 25% in 2005
- The industry's use of castings, forgings, and machining, makes turbine manufacturing a significant contributor to U.S. heavy manufacturing.
- Wind turbine equipment manufacturers are similar to automobile assemblers that make a car or truck - they are mostly system integrators.
- Assemblers must bring together an estimated 8,000 precision parts and components to produce a wind turbine...Very high levels of expertise and specialization are required of wind turbine suppliers, with the level of precision similar to that of the aerospace industry."
"Wind power is one of the fastest growing U.S. manufacturing sectors. Huge progress has been made in 'insourcing' new wind factories and jobs. America needs supportive, consistent policy to unleash the wind industry's full potential. Now is not the time for a tax increase on wind," says Denise Bode, AWEA CEO.
Read the report, "U.S. Wind Turbine Manufacturing: Federal Support for an Emerging Industry."