RENEWABLE ENERGY:

Wind layoffs mostly hitting constituents of PTC supporters

The spate of layoffs that wind industry advocates have warned about has accelerated in recent weeks, with workers losing their jobs in key wind states such as Iowa and Colorado in a trend expected to continue at least into next year.

The layoffs can be pinned in part on congressional foot-dragging around an expiring tax break for wind energy that the industry says must be extended beyond the end of this year. The growing number of people -- many of whom are likely to cast ballots in November -- who have lost or are in danger of losing jobs put a face on the consequences of Congress' inaction.

But it remains to be seen whether those layoffs boost the prospects for extending the production tax credit, as virtually all that have been announced have come in House districts represented by lawmakers who support extending the credit, according to a Greenwire analysis. And economists note that extending the PTC alone will not be a panacea for the wind industry, which also faces pressure from low prices for a competing power source, natural gas, and slowing demand to meet state renewable energy targets.

Rep. Cory Gardner (R-Colo.) is one member who last week watched 30 of his constituents lose jobs at a Vestas factory in Brighton. Vestas earlier this month let go another 90 workers at a factory in Pueblo, Colo., and 174 employees were downsized at Cedar Rapids, Iowa-based Clipper Wind Power last week.

Gardner earlier this year was among 18 freshmen, mostly Republicans, who wrote to House leadership this summer urging quick action on an extension to the tax credit.

Congress is set to return to Washington on Sept. 10, after the political conventions, although members are expected to be in town for only a few weeks before returning to the campaign trail. Lawmakers are expected to adopt a continuing resolution on appropriations to keep the government running through the election and face a Sept. 30 deadline to act on the farm bill, which Gardner sees as a potential opportunity to act on the credit.

Possible farm bill amendment

A group of lawmakers, including Gardner, are "considering" introducing a PTC amendment to the farm bill, he said, although he stressed that plans are still in flux and no decisions have been made. Gardner and Rep. Ed Perlmutter (D-Colo.) considered offering an amendment to the transportation bill earlier this summer that would extend the PTC while also mandating approval of the controversial Keystone XL oil pipeline, although those plans never came to fruition, he said.

Gardner pressed the case for a PTC extension again earlier this month when Speaker John Boehner (R-Ohio) visited his rural eastern Colorado district. He said the layoffs in his district and those of other PTC supporters raise the stakes for Congress to act, which he would like to see happen as soon as next month's abbreviated session.

"I never want to use job losses as a chit to get somebody's attention," Gardner said in an interview last week. "But we need to make sure that people understand what's happening -- real job losses are occurring, like we said they would occur."

That said, Gardner is not wishing for the job losses to spread to districts of House members who may still be on the fence over whether to extend the credit.

"I hope that they will get the message" without having to see their own constituents thrown out of work, Gardner said. "I don't want it in mine. I don't want it anywhere."

Rep. Scott Tipton (R) represents a rural swath of western Colorado that includes Vestas' Pueblo factory that lost 90 workers earlier this month. Another freshman active on energy issues, Tipton said he is "deeply troubled" by the layoffs and strongly supports a temporary PTC extension to provide certainty for the industry until Congress can tackle comprehensive tax reform. Tipton joined Gardner and the other freshmen on the letter earlier this summer.

"In order to make this extension a reality, it must be fully paid for, and I stand with our domestic wind power producers in acknowledging that the credit extension should be temporary with a plan for substituting the credit with comprehensive tax reform. Only through a comprehensive overhaul of the tax code can we level the playing field for all energy resources," Tipton said in a statement last week.

"Until that becomes a reality, I will continue to work with my colleagues in the House and take every opportunity to temporarily extend the credit to restore market certainty and the valuable jobs that depend on it," he added. "It is my hope that we will see this extension by the end of the year."

The issue is gaining steam on the campaign trail, where Democrats have accused Republicans of not doing enough to shepherd the tax credit through Congress. Tipton is expected to face a close re-election race in November, and his Democratic challenger, state Rep. Sal Pace, last week accused Tipton of doing nothing to advance the PTC, pointing to his votes in favor of the House Republican budget that would have eliminated the credit and pointing to the GOP party platform's lack of support for the PTC.

"I'm concerned for our community, considering Scott Tipton falls in line with his party almost 100 percent of the time," Pace said in a news release. "These are the wrong priorities for Colorado, and Colorado needs a representative who will put Colorado above party and do what's right."

Layoffs nationwide

At least 11 companies this year have announced plans to lay off workers or forestall new hiring so far this year, according to figures maintained by trade groups, industry analysts, and a search of company announcements and press reports.

More than 2,200 jobs have been cut, are at risk or were never created, although an untold number more likely have been affected through cuts at smaller companies that may not have generated formal announcements. The downturn has affected jobs in at least a dozen states, from Massachusetts to Oregon to Arkansas.

Every facility affected by the announced layoffs, except one, sits in a House district whose member supports extending the PTC. DMI Industries recently announced plans to lay off 167 workers by November when it closes a tower factory in Tulsa, Okla., in the district of Rep. John Sullivan (R). Sullivan has not publicly taken a position on the tax credit; multiple calls and emails to his office went unanswered last week.

Uncertainty over the tax credit's fate can be blamed for a substantial portion of those layoffs, economists say, although the industry also is suffering because of low natural gas prices that have made it more difficult to compete with gas-fired power plants and because of slackening demand driven by state-level renewable energy mandates.

The American Wind Energy Association estimates the job losses will total 10,000 by the end of this year and 37,000 by the end of the first quarter of 2013 without an extension of the tax credit. The industry employed about 75,000 workers as of the beginning of this year, according to AWEA.

"I'm deeply distressed that our wind industry colleagues are facing furloughs and layoffs due to lack of stable tax policy," AWEA CEO Denise Bode said in a statement last week. "Unfortunately, the industry has begun letting workers go up and down our American manufacturing supply chain, which the industry has so proudly built up in support of the U.S. economy and made-in-the-USA manufacturing. Congress must act now to give wind energy a stable business environment to keep building this new industry and save 37,000 American jobs by the first quarter of next year."

The House is the source of the greatest uncertainty when it comes to the fate of the production tax credit, which will expire at the end of the year unless Congress acts. Senior House lawmakers have said the lower chamber is unlikely to address the issue until after the November election, at which point it will have to deal with an array of temporary tax breaks that typically get extended just before their expiration.

Legislation introduced last year by Rep. Dave Reichert (R-Wash.) to extend the PTC through 2016, H.R. 3307, has attracted 111 co-sponsors, including two dozen Republicans. However, the credit has split the GOP, especially among freshmen elected with tea party support. Dueling legislation from Rep. Mike Pompeo (R-Kan.) that would eliminate the PTC and several other energy-related tax breaks has 27 co-sponsors, all Republicans, including 15 freshmen.

The credit has an easier road to travel in the Senate, where supportive Democrats maintain the majority and where a tax extenders package including a one-year PTC extension won bipartisan support from the Finance Committee earlier this month (E&E Daily, Aug. 3).

PTC not sole cause of wind woes

Inaction on the PTC is certainly to blame for some of the downturn expected in the wind industry next year; manufacturing companies that have laid off or expect to lay off workers cite empty order books for 2013 as project developers put their plans on hold until Congress acts.

But economists note expectations of fewer installations next year even if the credit is extended.

The industry is expected to install about 11.8 gigawatts of new turbines in 2012, more than a third of which is expected to come online in the last two weeks of December as developers race to meet the PTC expiration deadline, according to Bloomberg New Energy Finance. But installations next year are projected to be less than half that level even with an extension of the credit. The analysis firm projects 5 GW installed in 2013 if the PTC is extended, or just 2 GW without the credit.

"A sharp drop in U.S. wind installations in 2013 is all but certain, regardless of whether Congress acts on the PTC this year," Bloomberg New Energy Finance analysts wrote in a note to clients earlier this month. "While ... extension of the credit would undoubtedly be a lift, the U.S. faces other challenges beyond PTC uncertainty, namely competition from natural gas, lack of demand from state mandates, permitting challenges, and -- in the manufacturing sector -- oversupply."

Low natural gas prices are expected to persist for several more years, continuing the difficulty for wind developers trying to compete with gas-fired power plants that will enjoy a price advantage in most areas, said Matt Kaplan, associate director of IHS Emerging Energy Research, another firm with a focus on the renewables sector.

Kaplan also noted that utilities in most states with renewable portfolio standards have enough wind capacity to meet their targets for the next few years, although RPS-driven demand could accelerate as the requirements for renewable generation grow beyond that. In the meantime, he said, there is more manufacturing capacity for wind turbines and other components than there is likely to be demand, meaning additional layoffs in the coming months are likely.

"It's this combination of factors that's creating the perfect storm, in a way, for the wind industry," Kaplan said last week. "Which is going to make it a very difficult 2013."

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