PTC reliance is 'like a drug addiction'

UNITED STATES: At the same time as the US wind industry has been immersed in an all-out lobbying push to win an extension of the $0.022/kWh federal production tax credit (PTC), there is growing sentiment that the time has come to look for a new and better way to support the sector's growth.

"I see the current PTC as a drug addiction for the industry," Theo de Wolff, principal at Iowa-based developer RPM Access,said at a wind-power finance and investment conference in San Diego last month: "We love it and we hate it and I say we really need to work on something new. It is ugly to have to go back to the government to hold out our hands for more."

The industry had been targeting payroll-tax legislation, which had to be passed by Congress by 29 February, as its best hope for winning an extension before the November presidential election. Wind energy lobbyists and company executives logged countless hours hammering home wind's benefits to lawmakers, culminating in a two-day blitz on Capitol Hill in early February. By then, the industry had shifted from seeking a four-year extension to being ready to settle for a more politically palatable single year.

The ongoing uncertainty and disruption that comes from this kind of short-term policy support is a problem, said Ty Daul, North American CEO for Element Power."If all we are doing is going for one- or two-year extensions, is it really the best thing for the industry?" he asked.

Daul's concern is that this short-term cycle has become the easiest option and one that keeps the industry from pursuing other ideas such as a long–term PTC extension that could be phased out completely over time, and which would give the sector a more stable and realistic planning horizon.

"I've been in renewables for over ten years now and, from the first day, I heard the PTCs were tough, they were ugly, and that it would be better if we had a five, seven or ten-year ramp down," Daul said. "Ten years later we still say it, but we are not actually moving in that direction."

Lack of courage

Tristan Grimbert, CEO of Enxco, agreed that the US industry "has not had the courage
to propose a long-term plan and stand behind it". Grimbert said it was a case of being torn between "holding out our arm and waiting for the next shot" or going into PTC withdrawal.

"We now have players that can wait a year or two and fight for something in a united way, fight for something that is really worth it ... a long-term plan," Grimbert said. "It could be the PTC ramping down, it could be a renewable-energy mandate, it could be whatever."

On the other hand, he added, the short-term continuation of the current subsidy would at least help keep supply-chain investments in the US alive.

Gabriel Alonso, CEO of EDP Renewables, agreed. "There are many turbine suppliers that have manufacturing plants here and have little ability to deliver equipment from these plants to other markets," he said. "Canada is not that big and there are local content requirements. Mexico is not that relevant, Brazil has its own local content provisions, Europe has its own manufacturing facilities, and you are not going to compete with China from here."

Alonso said he had spent around half of his time over the past four months in Washington lobbying for the PTC extension. "The industry is not about the developers," he said. "It is all about the turbine suppliers, and they cannot live with no installed capacity here in 2013. That is why, in the end, if we can get one year, we will take it."