Wind energy industry recharged by renewal of federal tax credit

February 9, 2013 by  
Filed under Green Energy News

Last Christmas, about midafternoon, high winds that brought yet another cold front through Texas contributed to a new wind power record, at one point providing about 26 percent of the electricity on the state’s grid.

The power registered from the turbines just after 3 p.m. on Dec. 25 was 8,638 megawatts, or enough to power just over 4.3 million homes.

But midafternoon on a cold December day isn’t a time of high electricity use. Most Texas homes are warmed by natural gas, and the sun would have been high enough in the sky that televisions and other appliances — not lights — might have consumed the most electricity.

In August, by contrast, when electricity use is high due to amped-up air conditioning and when breezes for driving wind turbines are light, wind provided 5 percent of the power on the electric grid.

Still, the Christmas contribution showed how serious a player wind power had become. A week later, Congress stopped short of the fiscal cliff, agreeing to a tax package that included the renewal of the tax credit that rewards developers of wind turbines.

That means, in other words, more wind power.

The renewal of the production tax credit, as it is known, had been up in the air, leading to a nationwide crush of wind power development in the closing days of 2012 as companies rushed to take advantage of what might have been an expiring tax credit.

The deadline in Washington and the rush to meet it were emblematic of the stop-and-start development of wind power in Texas. A combination of state legislative mandate and federal tax credits has spurred the industry, which has otherwise had trouble competing with established and more reliable energy sources such as coal, natural gas and nuclear power.

The renewal of the federal production tax credit has smoothed the way for further development.

Any wind installation under construction in 2013 would be eligible for the tax credit, which is worth 2.2 cents per kilowatt-hour of energy produced during the first 10 years of operation. That subsidy knocks off between a quarter and a third of the cost of producing energy from wind.

The federal Energy Information Administration in 2012 predicted that electricity from a new wind farm in 2017 would cost $96 per megawatt-hour; from a new coal plant, $98 a megawatt-hour; natural gas, $66; and nuclear, $111.

“I expect that the first additional power source we’ll be looking at is some more wind,” Austin Energy General Manager Larry Weis said. “We expect to have some opportunities here in the near future with the tax credit being renewed.”

Austin Energy gets 851 megawatts of power from wind, bringing renewable energy to 27 percent of its overall supply. Its goal is to get 35 percent of its energy from renewable sources by 2020. Citing competitive concerns, the utility declined to say how much it currently pays for wind energy.

Companies are investing in wind, too.

Google announced in January that it had invested $200 million in a Panhandle wind farm called Spinning Spur.

“We believe that government incentives like the production tax credit play an important role in fostering private investment in clean energy, in order to transform our economy over the long-term and achieve energy independence,” said Kojo Ako-Asare, a member of the Google corporate finance team that worked on the wind project.

Spinning Spur was able to reach commercial operation in late December 2012, so the extension of the tax credit wasn’t a factor in the financing arrangement with Google, said Sandi Briner, director of communications with EDF Renewable Energy, which built the project.

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