Greentech Industries Imperiled by Anti-Stimulus, Removal of Federal Supports

September 22, 2012 by  
Filed under Wind Energy Tips

One of the highlights of the stimulus package, according to Michael Grunwald’s book The New New Deal, was the $90 billion in investment in green energy. This kick-started a moribund industry and more than doubled the output of renewables as a percentage of overall energy.

What it did not do is secure the place of renewables in the US energy mix. All stimulus eventually becomes anti-stimulus, and Congress is poised to do even worse than that; not only by allowing the green energy investments to lapse, but also by cutting back on the original supports for renewables in ways that will just crush the industry. This can be most vividly seen in the potential lapse in the wind energy production tax credit, which is already leading to thousands of job cuts in the sector.

At its peak in 2008 and 2009, the industry employed about 85,000 people, according to the American Wind Energy Association, the industry’s principal trade group.

About 10,000 of those jobs have disappeared since, according to the association, as wind companies have been buffeted by weak demand for electricity, stiff competition from cheap natural gas and cheaper options from Asian competitors. Chinese manufacturers, who can often underprice goods because of generous state subsidies, have moved into the American market and have become an issue in the larger trade tensions between the countries. In July, the United States Commerce Department imposed tariffs on steel turbine towers from China after finding that manufacturers had been selling them for less than the cost of production.

And now, on top of the business challenges, the industry is facing a big political problem in Washington: the Dec. 31 expiration of a federal tax credit that makes wind power more competitive with other sources of electricity [...]

Opponents argue that the industry has had long enough to wean itself from the subsidy and, with wind representing a small percentage of total electricity generation, the taxpayers’ investment has yielded an insufficient return.

But the tax credit is really a small incentive that tips the scales and leverages financing for wind energy. If this were an environment where only wind energy had subsidies, maybe critics would have a point. But the oil and gas industry gets subsidies that are about four times as great on an annual basis, and more importantly, those don’t have to be constantly renewed year after year. The fraught renewal process, as much as anything, has caused problems for the wind industry, making it hard for them to cement long-term goals. These are decent-paying jobs in a growing industry that would see its legs cut out from under it without the production tax credit.

Worse, the automatic sequester cuts scheduled to start at the end of the year would do violence to greentech research, development and innovation, despite the theory that the President would protect investments of this type.

The sequester requires cuts in discretionary spending to achieve $1.2 trillion in savings from 2013- 2021. When compared to 2011 spending levels, this will lead to a cut of 8.7 percent (or $12.5 billion) of federally-funded research and development (RD) in 2013. Because of the key role federal RD plays in driving U.S. innovation, productivity, and economic growth; we estimate that the projected decline in RD will reduce GDP by between $203 billion and $860 billion over the nine year period, depending on the baseline used.

That’s for the entire economy, but it really hurts greentech specifically. And it would cost 200,000 jobs in RD right away in 2013.

One thing we can say here is that the “new new deal” for green energy in the stimulus plainly wasn’t enough to sustain these new industries. If taking away a $1 billion annual tax credit could sink the entire wind industry, then the stimulus wasn’t transformative to any degree. There were some policies that could have improved the situation – Mary Landrieu’s vote was all that stopped a renewable energy standard in 2008 that would have mandated renewables as a percentage of the energy mix – but they never got passed. As a result, we are on the verge of sacrificing yet another industry that we invented, with damaging consequences for the future of the planet, in addition to jobs and the economy.

Comments are closed.