POLITICS

Perry targets incentive that pushed Texas to the top in wind power

Texas Gov. Rick Perry previously supported the extension of federal incentives for wind power before signaling last week that he would let them expire if elected president.

The production tax credit is widely seen as a key driver of the Texas wind boom. It lowers the cost of producing wind power by 2.2 cents per kilowatt-hour, providing a financial edge that has helped developers compete with low-priced electricity derived from coal and natural gas.

The credit, called the PTC, was so instrumental in the state's rise to wind dominance that a report issued by Perry's office last year described it as a "crucial" piece in a broad plan to lower the price of wind energy. It complemented a state mandate requiring utilities to use more renewable energy and a fee-based program designed to carry far-flung wind power to urban centers along new transmission lines.

"There can be no question that it's been an important tool for the industry," Paul Sadler, executive director of the Wind Coalition in Texas, said of the tax credit.

When Perry proposed to let the tax credit lapse last week, along with fossil fuel incentives, it marked a new course for the Republican governor, whom wind supporters in Texas describe as an unflinching steward of the industry. Perry may not have initiated the state's wind ascent -- former Gov. George W. Bush (R) is credited with that -- but he guided it to its current summit.

Texas has, by far, the most wind power in the United States. It passed a major milestone last year by reaching 10,000 megawatts of installed wind power -- a threshold reached by the entire country just four years earlier.

Yesterday, the American Wind Energy Association (AWEA) said that wind power on the Texas grid set a new output record on Oct. 7, when wind met 15.2 percent of its demand for electricity. It reached 7,400 megawatts, producing slightly more power than the output of seven large coal-fired power plants.

During wind's rapid rise, Perry pressed for an extension of the stop-and-go production tax credit in 2008. The credit has come and gone amid disagreements in Congress, and with each expiration, supporters point to sudden lulls in new wind projects.

In a speech to the American Wind Energy Association in June of that year, Perry warned of "the looming expiration of federal wind energy tax credits."

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"These sensible limits have lowered the barriers to success of this essential technology and freed capital to be used in accelerating its adoption," Perry said at the time. "I believe the federal wind energy tax credits should definitely be renewed for at least another cycle, so be sure to let Washington know how you feel."

All subsidies 'on the table'

That a Republican governor would endorse the renewable energy policy was not seen as remarkable, recalls Randy Swisher, who hosted the 2008 event as the former executive director of the American Wind Energy Association.

"There was nothing particularly unique about Perry's support for wind and the PTC at that point. He was really walking a tradition that had been established by Governor Bush," Swisher said. "What is striking, in fact, would be Perry's pulling away from that support."

Perry's energy plan, a 41-page document, provides general statements about allowing energy incentives to expire. It doesn't identify specific tax credits, but a campaign spokeswoman said all of them -- those benefiting fossil fuels and low-carbon energies alike -- are "on the table."

"The governor believes that every energy sector will benefit from phasing out subsidies and incentives," spokeswoman Catherine Frazier said in an email. She added that Perry supports rolling back a key oil and gas subsidy -- the Domestic Manufacturing Tax Deduction -- that President Obama has also targeted.

But the terse tone of Perry's plan toward renewable energy worries some wind advocates. Unlike the fossil fuel industry, the wind sector is still emerging, and a discontinuation of the tax credit could slow development, they say.

"We've been growing pretty dramatically in wind energy, and been bringing the costs down dramatically, but we're not at the point ... where the PTC could be removed and keep the jobs going and keep the technology improving," said Rob Gramlich, senior vice president of the American Wind Energy Association. "The PTC has been the No. 1 policy driving wind energy."

The Texas comptroller voiced similar caution in an energy report in 2008. "The rapid growth in wind power that Texas has experienced since 2005 would likely slow if the federal production tax credit (PTC), which is scheduled to expire on December 31, 2008, is not extended," the report says.

Will wind wither or thrive without federal help?

But some wind advocates believe Perry's plan could satisfy the conservative movement to limit government spending while also advancing wind power. If Perry eliminates the host of subsidies for fossil fuels and renewable energies alike, they say, then wind power would be an attractively priced form of electricity compared to coal and natural gas.

"He's been one of the most supportive governors, if not the most supportive governor, of wind energy in this country over the last decade," said Sadler of the Wind Coalition. "So I don't think his policy is directed at wind."

Still, even Sadler has doubts that Perry will achieve cutting the list of fossil fuel subsidies, many of which are built into the tax code and would be stoutly defended by powerful special interests. He notes that state incentives disproportionately benefit oil and gas -- 99 percent of supporting dollars goes to fossil fuels, the state comptroller has reported -- while wind power enjoys "fractional" support of less than 1 percent.

"Good luck," he said.

The production tax credit is set to expire in December 2012. If it's not renewed, there's a good chance that wind development could slow down, says Ryan Wiser, a staff scientist at the Lawrence Berkeley National Laboratory.

Currently, wholesale electricity prices in Texas are in the range of 4 cents per kilowatt-hour. It costs about that same price to build a wind energy facility, with the production tax credit, Wiser said.

"Without the production tax credit, the cost of wind would be at least 2.2 cents per kilowatt higher, making it pretty obvious that wind is not competitive with current wholesale electricity prices in the region," he said.

Asked about Perry's outlook on the affordability of wind power without the tax credit, Frazier, his spokeswoman, answered that "he believes the TX industry would continue to thrive."

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