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Big gains for wind in Bush budget -- PTC extension proposed

President George W Bush's proposed fiscal year 2006 budget includes a two year extension of the production tax credit (PTC) and an 8.4% hike in research and development (R&D) funding -- gains for wind in a national budget that otherwise takes some deep swipes at spending on domestic programs.

The president's proposal for wind totals $44.2 million out of a $2.57 trillion budget plan, a $3.4 million increase over the $40.8 million wind energy research will receive in 2005. "We are very heartened to see an increase in the wind energy R&D budget because most of the other renewable energy programs and energy efficiency programs were reduced," says Jaime Steve of the American Wind Energy Association (AWEA).

The increase is far from the $55 million the Sustainable Energy Coalition (SEC), a group of US business and environmental organisations that includes AWEA, was seeking to back research into developing turbines capable of operating in areas with lower wind speeds and integrating wind energy into the nation's power grids. But in relative terms, says Steve, it was a significant gain.

"The entire federal budget is going to be so tight this year. Essentially there are no increases outside of defence and homeland security, and we are going up."

Other renewable technologies did not fare as well. The budget calls for cuts to the Department of Energy's energy efficiency and renewable energy program totalling about $50 million.

Hydropower research took the biggest hit, losing nearly 90% of its funding. Biomass lost $30.5 million, about 38% over 2005. Geothermal research spending was cut by nearly $2 million, or 8%, while solar energy funding was cut by just over $1 million. At the same time, the budget proposes a 5.4% increase in hydrogen technology research funding to $99 million and a 12% hike in the fuels cells program to $83.6 million.

The president's PTC proposal is "a very positive step along the way" to extending wind power's tax credit beyond its expiry date at the end of this year, says Steve. "We are very pleased to be in the Bush budget for a two-year extension. Of course, we are going to be seeking a longer term extension through the processes on Capitol Hill," he says.

A likely route for passage of a PTC extension is a comprehensive energy bill, which lawmakers in both the Senate and the House of Representatives are in the process of considering. A PTC extension would be included in a package of energy tax credits drafted by the tax committees of Congress, says Steve, then grafted on to the energy bill.

CONVINCED

When that might happen is difficult to predict, says Steve. "I'm convinced we are going to get it done again. I've seen this movie three times and it always ends the same way. We always get it done, the question is when," he says.

Congressional infighting has stalled passage of an energy bill over the last four years. "One thing I can tell you is that the Republicans, who run the show on the House and Senate side in the energy committees, are reaching out more to the Democratic side to try to fashion something of a more bipartisan bill that can ultimately become law," says Steve.

Tax code cloud

A potential cloud on the horizon, however, is another Bush priority in his second term, says Keith Martin, a partner in the law firm Chadbourne & Parke LLP. The president wants to revamp the federal tax code, and although it is far from certain he will make much headway, it could have a significant impact on an industry that relies so heavily on tax credits.

"If fundamental tax reform goes through, that could have a major effect on the production tax credit. It may not be of much value," Martin told delegates to Infocast's Wind Power Finance and Investment conference, held in San Diego last month. "So people are watching that to see where that goes."

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