With the Senate scheduled to consider tax extenders when it returns from its recess, how is the wind industry managing the uncertainty surrounding an extension of the production tax credit? During today's OnPoint, Tom Kiernan, CEO of the American Wind Energy Association, discusses AWEA's annual market report for 2013 and talks about the impact the evolving utility business model is having on growth within his industry. He also discusses his group's lobbying strategy for 2014.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Tom Kiernan, CEO of the American Wind Energy Association. Tom, thanks for coming on the show.
Thomas Kiernan: Great to be here with you, Monica.
Monica Trauzzi: Tom, AWEA has just released its annual market report for 2013. Talk about new power. What are the numbers there in the United States?
Thomas Kiernan: This is an exciting time for wind power. Right now we've got over 12,000 megawatts under construction, over 100 different wind farms throughout the country that are being constructed. It's a result of a couple of things; one, the decreasing cost of wind energy. It's come down 43 percent in the last four years, so wind energy is getting cheaper and cheaper. It's also a result of last year, for a one-year window, Congress did pass the production tax credit and we're very thankful for that. That helped catalyze this boom, but unfortunately PTC did expire and now we're working to get it passed again.
Monica Trauzzi: And we'll talk about that. The utility business model is rapidly evolving. How is that evolution sort of demonstrated in these numbers?
Thomas Kiernan: Utilities are, you know, use wind energy as kind of a fundamental energy source for them. So we're part of the grid right there with utilities. We're not like solar events on the net metering side of it. So we're just a fundamental part of energy being provided into the grid, and frankly it's been exciting over the last couple of years how wind energy is increasingly being balanced by itself on the grid. We've got enough wind energy out there that maybe in one part of the state it may not be blowing right now, but in another part of the state it's blowing quite well. So on balance it integrates well in the grid.
Monica Trauzzi: On the whole, investments for clean energy were down in 2013, so what can the industry do to bring more investments in?
Thomas Kiernan: I think fundamentally it is about creating a certain policy environment. We have, over the last number of years, gone through this boom-bust cycle because of the uncertainty with the PTC, so it's tough for investors to feel confident that two years from now, three years from now that there will be the production tax credit. So we are calling on Congress to create that more certain policy environment by getting the PTC with start-construction language extended again.
Monica Trauzzi: But at the same time this report, for example, is a generally good news story for your industry. So why, then, does the industry continue to need the PTC?
Thomas Kiernan: It's a great question. We are, in a couple parts of the country, maybe in Colorado or Texas, we are cost-competitive. We've got a very cost-efficient product out there, and in some parts of the country we're very competitive with natural gas if not beating it. But that's not throughout the country, so we've got -- the cost curve of wind energy is coming down. We are looking to need the production tax credit for some more time, but not forever. We believe the production tax credit won't be needed forever. We do need it for the foreseeable future, but the costs are coming down and soon we'll be in a place where it's not needed.
Monica Trauzzi: What's the time frame? What's the foreseeable future?
Thomas Kiernan: You know it's hard to say at this point. I can't project that out. In comprehensive tax reform, if and when we get to a serious discussion on tax reform, the industry is willing to consider not having or phasing down the production tax credit if all other energy sources are at the table as well, whether it's coal, gas, etc., in removing their -- phasing down their tax credits as well.
Monica Trauzzi: Some Republicans in Congress believe that as time goes on the PTC increasingly distorts electricity markets, and there's a big lobbying push on the Hill to this effect. Can you continue to make a valid case for the PTC, or is it time to maybe look at some other incentives for the industry that maybe aren't structured like the PTC, but that could incent the industry to continue?
Thomas Kiernan: I would come back to the point that all the other energy sources have their tax credits. Those are permanent, and frankly they have, over the life of those industries, received a whole lot more than we have received in tax credits. First and foremost, we're looking for some degree of parity and support to make up for all the other incentives that those industries have gotten over the years. Might there be even more efficient ways of supporting the wind industry? Yes. And we did come at -- Senator Baucus, when he was chair of the Senate Finance Committee, did come out with his technology-neutral approach and we said boy, that's got some merit as well. So we would look forward to looking at those creative solutions in the context of comprehensive tax reform where the other industries are equally coming up to the table.
Monica Trauzzi: AWEA has hired former chief of staff to Senator Carper, James Reilly, to oversee lobbying on the Hill. He obviously has close Senate ties. How are you hoping or expecting that he will influence the debate over the production tax credit?
Thomas Kiernan: We're thrilled to be hiring Jim, having him come on as senior vice president for legislative affairs. He's a proven strategist. He's got a great experience working both sides of the aisle, and so I think he'll just be a great leader for our strategy up on Capitol Hill and moving the industry forward. So he's going to be a great addition.
Monica Trauzzi: How much will AWEA spend on lobbying in 2014?
Thomas Kiernan: I couldn't tell you right now. I'm not sure. I mean 2014 is an important year for us with the production tax credit, but off the top of my head I couldn't give you any type of number.
Monica Trauzzi: So will it be more than in 2013?
Thomas Kiernan: I would imagine but would want to double-check those numbers.
Monica Trauzzi: All right, we'll end it right there.
Thomas Kiernan: OK.
Monica Trauzzi: Thank you for coming on the show. Nice to see you.
Thomas Kiernan: Thank you very much, Monica.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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