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United States

Second Obama term would stabilise support for wind

UNITED STATES: US President Barack Obama has said the Production Tax Credit (PTC) and Investment Tax Credit (ITC) for renewable energy should become permanent. His startling comment came during an April visit to Gamesa's wind-turbine nacelle manufacturing plant in Fairless Hills, Pennsylvania.

"We want to make them permanent so that people aren't looking every few years to try to figure out if this investment is going to be there for us," Obama said to applause in response to an audience question about the credits' volatility.

"I want to kick-start this industry," he continued. "I want to make sure we've got good customers, and I want to make sure that there's the financing so that we can meet that demand. There's no reason why we can't do both (of the tax credits), but it does require us getting past some of these political arguments."

Eligibility for the PTC currently expires at the end of 2012. For a wind project to qualify for the 30% ITC, which can be converted to a cash Treasury grant, construction must be started by the end of 2011.

The tax credits have a history of expiring and being reinstated retroactively for a year or two, or being extended at the last minute, all of which vastly complicates project planning and has forced the US industry onto a rollercoaster of peaks and troughs.

Last minute

The PTC credits may well be extended temporarily, although that might not occur until the last minute. The Treasury grant programme - which is valuable to investors during an economic slump when they have less tax exposure - is less likely to be extended, for political reasons.

Congressional opponents of the tax credits say they overly contribute to the federal deficit and that wind and other renewables should stand on their own, despite the subsidies given to fossil fuels.

The president's comment came on April 8 during a Q&A session that followed a speech on energy policy in which he did not mention wind specifically. Even so, Obama's speech and comment came just days after he announced that he would seek re-election in 2012, suggesting that renewable energy could well become an issue in Obama's bid for a second and final term, and in the elections for Congress.

Ed Einowski, a partner at law firm Stoel Rives who watches federal policy, said the likelihood of permanent credits becoming law depends upon the outcome of the 2012 presidential and congressional elections.

If Obama is re-elected, Einowski said that the president would not have to factor his re-election prospects into decisions, so his policies could be bolder.

Since views on the tax-credit issue break down mainly along party lines, if the Republican majority in the House of Representatives is either erased or narrowed significantly, Einowski said there was a possibility of a law making them permanent because there is already a Democratic majority in the Senate.

In his speech, Obama also advocated a clean-energy standard, in which a specific proportion of energy nationally is sourced from clean sources including wind, a concept that he and his supporters are pushing on Capitol Hill.

"If we get a clean-energy standard, then Gamesa is going to have more customers," said Obama. "It's not going to immediately transform the wind industry, but it's going to make it that much stronger."

The US president also called for regional cooperation on smart grids and transmission, which he noted can get bogged down in a patchwork of different zoning laws as well as facing opposition from residents.

"We should be able to get this done, but it's going to require some organisation and it requires [more] cooperation from each of these different units of government than we've got right now," he said.

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