United States

United States

America on the brink

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Early next month Americans will choose a new president. This has no small bearing on the wind power industry. In past weeks industry members have seen the US overtake Germany as the country generating the most wind energy and cement its position as the world's fastest growing wind market for the third year running. Democratic Senator Barack Obama and Republican Senator John McCain have both professed support for wind power, as have the platforms of their respective parties. It is not a case of one party being pro-wind and the other anti-wind, they say. Speaking against wind power, however, would be akin to condemning the flag and apple pie, such is the popularity of home-grown clean energy these days.

The real question is whether either of these professional politicians will do anything substantive for wind power and if action can match rhetoric. Much is at stake. As Windpower Monthly went to press, the tax credit granted to owners of wind plant for every green kilowatt hour they produce was on track to sunset at year's end. A long expected extension of the credit was still an uncertainty. Many plans for wind plant construction in 2009 are in a holding pattern, waiting to see whether Congress will be bold enough to vote the production tax credit (PTC) onto the statute books for another year, or more.

With the rapid expansion of the market, the cost of the PTC to taxpayers is shooting up. That is not helping matters. The $0.021/kWh credit is worth $0.33 per dollar of the capital cost of a wind farm. Coupled with a five-year accelerated depreciation allowance worth about $0.30 per dollar of capital cost, the existence of the PTC means the federal government is paying for about two-thirds of the cost of all wind energy delivered to the grid. On the other hand, tax revenue from the wind industry probably offsets the cost of the tax credit. GE Energy says the cost of the PTC in 2007, amounting to $2.5 billion in tax credits for energy produced by 5244 MW of wind energy generating capacity, was offset by tax revenues providing a total net present value contribution of $2.75 billion to federal coffers.

But this nuanced balance is not as easy to see as the up front price tag. With America buried in debt and rocked from Wall Street turmoil, all spending plans are in jeopardy. The PTC may be getting too hard to fund and the wind industry is tired of the roller-coaster ride of expiry and extensions. In a world of rising prices for electricity from fossil fuel plant, many in the wind industry quietly believe most US wind projects would still be profitable without the PTC. But they risk being blasphemed by the industry at large for saying so. Any suggestion the PTC is a layer of cream on the cake at least some of the time could herald its political death in the current climate of severe cost cutting.

Whether or not the PTC is extended before next year, America's president, whoever that may be, will play a role in decisions to continue tax credit support or move to a more stable and long-term market structure. Beyond rhetoric and glowing campaign promises, each candidate's history supporting wind power offers a glimpse of what the post-George W Bush era would be like. There is no mistaking that most wind executives believe an Obama or McCain administration will be an improvement over the past eight years. But they also say candidly that an Obama administration will do more.

McCain tips over the edge

McCain, whose campaign features a TV commercial with wind turbines as a backdrop, has deliberately missed eight Senate votes to extend the PTC. The man once known as every Democrat's favourite Republican for his moderate views, including his belief in global warming and support for climate change legislation, is turning out to be a mirage. In seeking the presidency, McCain has transformed himself with a shift to the right that does not bode well for clean energy. He led the "drill baby drill" chant at the Republican convention calling for more offshore oil drilling to be a centrepiece of his energy platform. His pick of Alaska Governor Sarah Palin for Vice President -- a global warming sceptic who favours drilling in the Arctic National Wildlife Refuge -- only cemented differences with Obama. McCain is against a national green electricity mandate, while Obama is in favour.

Both candidates support climate change legislation. But George W Bush's broken campaign promise in 2000 to reduce carbon dioxide emissions is not forgotten. A McCain administration seems just as likely to back away from any meaningful climate change legislation. This is not the same McCain of a couple years ago -- and his oil and utility industry backers know it. Second to a drilling spree, McCain is most keen to kick-start a nuclear power plant building frenzy by calling for as many as 45 new reactors, backed by costly insurance from American taxpayers. He quotes ludicrous figures on how many jobs that would create.

Obama is hardly an energy expert either. He has been deeply enamoured with "clean coal" technology, an oxymoron that has consistently failed to prove commercially viable. Both candidates need a reality check. Their campaign promises and lofty plans must be re-evaluated in light of America's growing economic crisis. Wind power must not be yet another casualty.

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