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United States

Clean energy standard could bring stable wind growth

UNITED STATES: Proposals for federal energy policy could provide a credible alternative to the soon-to-expire tax credit but the timing could not be worse.

While the US wind industry struggles to keep its key support mechanism from expiring at the end of the year, a government analysis published last month finds wind energy would benefit substantially from policy designed to drive demand over the long term.

The US Energy Information Administration (EIA) predicts that under a federal clean-energy standard (CES) currently before the Senate, the upper house in the US Congress, installed wind capacity would more than double from 39GW in 2010 to 92GW in 2035. Wind energy production would increase from 95TWh in 2010 to 268TWh over the same period.

The legislation, floated earlier thisyear by a Democrat senator, Jeff Bingaman, would require large retail utilities to obtain 24% of the electricity they sell from clean energy sources starting in 2015, with the mandate increasing by 3% each year through 2035.

Bingaman's proposed standard includes all generating sources that have lower carbon emissions per unit of electricity than a modern coal plant. The plan would "significantly reduce the role of coal-fired generation while increasing the role of nuclear, natural gas and non-hydropower renewable technologies", the EIA said.

The CES has virtually no chance of passing Congress this year, given Republican aversion to mandates and the acrimonious partisan divide that has intensified in the run up to November's presidential election. But the EIA analysis comes at a time when there is growing discussion about alternatives to the on-again, off-again $0.22/kWh production tax credit (PTC).

A joint report published in April by think tanks the Brookings Institution, World Resources Institute and Breakthrough Institute analysed US support for clean tech investments. It concluded that a business-as-usual strategy of perpetual policy expiration and renewal is no longer sustainable and suggested a better approach would be the introduction of policies designed to accelerate technology improvements and cost reductions.

Several Washington lawmakers have also suggested that wind advocates, who have been so far unsuccessful in their all-out push to get the PTC renewed for another year, need to take a different tack.

Max Baucus, a Montana Democrat who is the Senate's chief tax writer, said the industry should consider backing a phase-out of the PTC over time as the most realistic path to an extension. "The more the industry can figure out a way to proceed by cutting back, phasing out, the better it would probably be," he said.

Peter Kelley, vice-president public affairs at the American Wind Energy Association (AWEA), said that while industry is looking at options for the long-term future of the PTC, its priority remains a full extension to take the industry through 2013.

Jesse Broehl, a Make Consulting adviser, said it is not surprising AWEA has not embraced the phase-out idea, given that it cannot know what market conditions would be once the PTC has gone. "They are going to be hard-pressed to support something that extinguishes their critical incentive," he said. But at the same time, some people think that it might be a good compromise, Broehl added. "I think there are sectors of the wind market that think this boom and bust is worse (than having no PTC)."

AWEA has lobbied for a federal mandate for renewable energy in the past, but that push has fallen by the wayside in the wake of the looming PTC expiration and the lack of political interest. But it provides a good basis for broader clean-energy policy discussions, said Kelly. "The industry will continue to examine a CES as a vehicle that can provide American businesses the certainty they need to plan and grow," he said.

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