AWEA campaigns for policies that will enable the wind industry to contribute to US economic growth, improve energy security and slow climate change. Its current priority is to secure an extension of the federal production tax credit (PTC) for wind energy, due to expire at the end of the year.
As AWEA prepares to step up the fight for a PTC extension, Windpower Monthly talks to its chief executive, Denise Bode. Bode joined AWEA in 2009, having previously served on the Oklahoma Corporation Commission - a regulatory body overseeing oil and gas drilling, utilities and telecommunications - and having led the American Clean Skies Foundation.
Q: Ros Davidson In the wind industry, we're acutely aware of the fight to extend eligibility for the PTC beyond December 31. In March, the Democrat-controlled Senate (the upper house in the US Congress) voted against an extension. Does AWEA see this as a blow?
A: Denise Bode I wouldn't characterise the Senate vote as being one against the PTC. The amendment that was voted against was a very big package of renewables provisions, some of which Republicans opposed even though Republicans were champions of the PTC.
RD: So what's next?
DB: With our champions in Congress, we are looking for the next legislative vehicle. We've been told they will consider adding the PTC extension to any vehicle, so we're waiting to see what's available. Meanwhile, we continue to describe the impact of wind manufacturing and the jobs created as a result of having certainty - of having a PTC.
RD: What might that legislative vehicle be?
DB: There's talk of an energy bill, since gasoline prices are so high. Or a small business bill. We have to wait and see. Our champions on Capitol Hill will be making that decision, not me.
RD: What about the length of the extension? In the Navigant report on the PTC's impact on wind, commissioned by AWEA, you look at four years. But the most recent effort was for an extension of just one year.
DB: At least for the next several months, we will continue fighting for one year. If we get it early, it could help avoid permanent or temporary lay-offs. Getting a one-year extension would keep the industry growing and orders moving. We obviously also need a long-term policy.
RD: What are the odds of getting an extension passed this year?
DB: I think it's very likely we will have an extension. The question has been whether we can save the manufacturing orders for 2013 by getting an extension passed as far ahead of the expiration as possible. We've never tried to do it this early before, so I couldn't tell you the odds. We have 400 manufacturing facilities making 60% of the turbine components installed in the US We've pretty much always been able to get the PTC extended in the past because it leverages $17 billion in private investment yearly.
RD: I guess it doesn't make it any easier that it is an election year, with President Barack Obama, a Democrat, seeking re-election and much of Congress up for grabs?
DB: This year's election makes it tough. Republican candidates are trying to outdo each other in going after President Obama and his energy policy. In addition, there's much concern about gasoline (petrol) prices, which are high partly because Iranian oil could be cut off. But the high oil prices could also mean that Congress is more likely to work on an energy bill.
RD: The Navigant study estimates that 37,000 or more US wind jobs could be lost in 2012 and 2013 if the PTC expires and if no extension is in the works. How many of the US's wind jobs are manufacturing jobs? And when exactly would manufacturing jobs be lost?
DB: Of the estimated 75,000 wind jobs, at least 30,000 are manufacturing jobs. And we predict that at least a third of those manufacturing jobs will be lost in 2012 and early in 2013 if we don't get this done - or at least get a signal that it will be done.
RD: How much of your lobbying is for the PTC (payable for the first ten years of a wind farm's output) compared with other incentives, such as Section 1603 (which offers grants of 30% of project costs) or the investment tax credit?
DB: One hundred per cent is for the PTC.
RD: Some say that the PTC has run its course and you should think of something new - that repeatedly going for a PTC extension is like drug addiction.
DB: I have clear direction from AWEA's board of directors to get at least a one-year, full-value extension as early as I can. If you're talking about energy policy or tax reform next year, then we'll be part of that discussion. Our board is willing to look at a variety of options. But the industry, in order to protect its manufacturing, needs an immediate PTC extension. We have to have the time and ability to have a discussion. If the industry's dead, it's dead.
RD: What other options might be looked at? A renewable energy standard or clean energy standard, a PTC that is ramped down over several years, or making wind enterprises eligible for master limited partnerships (which do not have to pay corporate income tax)?
DB: We don't need tax incentives forever; we would be willing to look at a variety of options. I don't have a list of those options - that's not our focus right now. But we understand the very difficult economic times and we're willing to be part of the solution, not part of the problem.
But right now, we have to finish the job - we have to continue to get manufacturing done in the US, which will reduce the cost of wind farms here. We're very competitive, even with natural gas. We're competing against industries that have had permanent incentives for 50 years.
RD: If there's only a one-year extension, what is the outlook for jobs and investment? Your Navigant report only considers a four-year extension.
DB: We're not just talking about a one-year extension.
I do think we need a one-year extension, but then there's going to be discussion about a broader energy bill or tax reform next year and at that point we'll talk about a longer-term policy. As you pointed out, there is a variety of options to help scale up to where we don't need a tax credit. But you can't do it in a context where jobs are being lost.
RD: Have we lost any manufacturing plants yet as a result of the PTC uncertainty?
DB: I'm assuming that furloughs (temporary redundancies) and lay-offs will begin as soon as the supply chain finishes this year's orders. As the year progresses, you are seeing a cascading effect on the supply chain.
To build and supply a turbine to a customer takes 18 months. So all of the orders for 2012 are already in. There are virtually no orders for 2013. And of course the turbine manufacturers also have to deliver their machines because they must be installed and producing electricity by December 31 to get the tax credit. So the supply chain is already wrapping up what it supplies to turbine manufacturers.
RD: What can you say about the outlook until 2020?
DB: We're already supplying 3% of the US's electricity, and we're looking at being 20% by 2030. That's a lot of turbines to be built and a lot of new jobs. We're actually on a faster clip than the Department of Energy recommended in its "20% by 2030" scenario.
And we haven't even started building offshore wind. That's a whole new sector.
This is a very difficult time for policy, given the partisanship. We're moving to the point where we don't need an incentive. And none of us likes to have to go back and defend ourselves every year as to why we're an American success story. This industry will continue to grow. It's just a question of how quickly America wants these jobs and manufacturing and this diversified portfolio.
RD: How much has your lobbying been hit by the scandal over Solyndra - the solar company that went bankrupt despite a $535 million federal loan guarantee?
DB: The wind industry doesn't use loan guarantees much. We depend on much more conventional finance. But obviously the badmouthing of renewables has an impact on everybody in the sector, including wind. It's bad, but that's what happens in an election year.
Before the last congressional elections, two years ago, the big issue was losing renewable industry jobs to China. And, of course, that really hasn't happened - to the extent that the Chinese are actually doing anything, they're coming to the US. They want to build manufacturing here, just like the Europeans.
RD: We're all aware of increasing shale-gas production, and that US natural gas prices are at record lows. With your background in natural gas, do you think gas prices will stay low and, if so, how will that affect wind?
DB: I think gas will slowly replace a lot of retiring coal plants and wind will replace them as well, to a lesser extent. You're seeing it already. Gas accounts for around 42% of all new generation and wind 35% on average We're going to be the energy sources of choice for different reasons.
RD: But don't the low gas prices take away from wind?
DB: Low gas prices really take away from coal.
RD: So cheap gas doesn't undermine wind at all - even the prices paid for wind in power purchase agreements?
DB: I think we offer different opportunities. You can make a negative story about wind and gas, but it's really about natural gas and coal. It's coal plants that are retiring. It's their market share that gas is taking.
Wind is priced differently and we are looked at differently. We offer something that no fossil fuel can offer - long-term contracts at fixed prices that are a hedge against volatility. It's like a 30-year fixed mortgage versus an adjustable mortgage that will change over time.
In the American gas business, it's mostly about independent producers, and although you've got integrated producers now buying the independents, they can't justify it to their shareholders because natural gas prices are below the cost of production. They have to be able to make money. So there has to be a levelling out of price.
We've gone through this before. We had the production boom when offshore oil and gas production first started in the Gulf of Mexico. Everybody said: "Oh we're going to have this gas bubble and the price will be the same forever." But it wasn't because, frankly, people have to be able to make money.
RD: You and Texan oil billionaire T Boone Pickens have promoted the idea of a wind-natural gas partnership, using both sources for generation and natural gas for vehicles. You co-authored an article on the issue with Pickens on Politico (the political journalism website) just before the 2011 AWEA conference. Yet, many people are increasingly uncomfortable with natural gas because of questions about the environmental safety of fracking - a procedure that releases gas from underground shale rocks - and because of methane emissions. Where does that leave AWEA and the prospect of natural gas as a "bridge fuel" to a low-carbon future?
DB: You're talking to somebody who was a state regulator of oil and gas. You can safely frack. You can regulate and manage it. The natural gas industry really got ahead of itself because they were drilling in places that did not have a mature regulatory structure. They also didn't have the infrastructure to properly address the fracking. Over time that will change, whether it is through federal or state regulation. It can be managed.
RD: So the controversy over fracking and methane emissions doesn't change your view of wind and gas collaborating?
DB: It's a matter of fact that wind and gas will be the two largest new sources of electricity generation.
RD: But doesn't the public perception of natural gas fracking make the partnership more difficult to sell?
DB: You know, we're focused on the PTC and don't spend a lot of time promoting our partnership. We try not to tear somebody else down and build ourselves up. We talk about the benefits of wind. Natural gas has to pretty much make its own case, although we do need to work together. We need each other to balance utilities' portfolios. Natural gas provides peak power in a way that wind can't. We need each other and should work together as much as possible.
RD: Other than the PTC, what is your focus for this year's AWEA conference in June?
DB: Windpower 2012 is coming to Atlanta, Georgia, because it is one of the fastest-growing hubs for wind manufacturing. With longer blades and taller towers, we're now able to capture the lower-speed winds in the south-eastern US. We want to ensure people in the region know both about our manufacturing and about wind as an energy source for balancing generation portfolios, particularly the wind along the coast and offshore. The region is also close to Europe, and there is interest in converting auto-component plants in the South to make parts for wind. There is a method to our madness - other parts of the country know us, and the South really doesn't.