The Tribune Democrat, Johnstown, PA

December 9, 2012

Winds of change? Industry’s economic impact threatened by credit lapse

Dave Sutor
dsutor@tribdem.com

JOHNSTOWN — There is a rallying cry for the wind industry: “20 percent by 2030.”

It is a reference to the goal of having one-fifth of the United States’ power produced by windmills within the next 18 years. The goal was set after former President George W. Bush made a comment about America’s need to diversify its energy portfolio during his second term.

Approximately 3 percent of the nation’s electricity currently comes from turbines. Building that capacity and aiming for the long-term goal has made a large economic impact. The Department of Energy stated, in a market report, $14.3 billion of wind project installation investment occurred nationwide in 2011, bringing the total to almost $100 billion since the beginning of the 1980s.

Those investments are felt in communities throughout Cambria and Somerset counties, where development companies buy concrete, steel and other manufacturing materials from local vendors. On-site construction workers purchase food and gas at area stores, while renting lodging at hotels. Wind companies make payments to municipalities and donations to school districts. The projects create jobs, which enable individuals to contribute local and state taxes for years.

“There are long-term financial benefits as well as short-term,” said Michael Sell, the community wind project coordinator for St. Francis University’s Renewable Energy Center.

The wind industry employs approximately 75,000 Americans.

Half of those jobs – and the entire “20 percent by 2030” goal – are in jeopardy because the federal wind production tax credit is set to expire at the end of this year. The credit has been a catalyst for wind development over the past two decades. It currently provides a 2.2-cent tax incentive for every kilowatt-hour put into the grid by windmills. The production-based tax break enables businesses to cut sometimes as much as one-third of their operating costs, which helps them create projects and generate investment.

The Congress’ Joint Committee on Taxation found that the PTC will amount to $1.36 billion of tax savings annually between now and 2015 if maintained. The American Wind Energy Association, a pro-wind development organization, estimates the tax break helps leverage $15.5 billion in private investment per year. In perspective, the oil and gas industry receives approximately $4 billion in annual subsidies.

The federal government is currently debating whether to extend the wind credit. All three times the PTC has previously expired, even for brief periods, the industry has struggled, with new installation rates decreasing by between 73 percent and 93 percent, according to Navigant Consulting, a research firm.

With the credit’s future once again uncertain, demand for windmill parts has slowed. Locally, Gamesa’s turbine manufacturing plant in Cambria Township laid off more than 160 workers this year.

“This is not a problem isolated to Gamesa,” said the company’s vice president of marketing and communications, David Rosenberg.

“Congress’ failure to extend the PTC, which expires at the end of the year, has caused a dramatic slowdown across the entire U.S. wind industry. Because the cycle time for wind projects is 12 months to 18 months, the PTC plays a major role in long-term investment decisions. Wind projects require significant lead times for permitting, ordering equipment, component manufacturing, civil works and construction.

“Because of uncertainty over the PTC, wind developers have halted projects beyond 2012, and commitments for equipment that would have been ordered for those projects have stopped. Supply chain and turbine factories have closed or slowed down and thousands of workers have lost their jobs. It will get worse without action.”

Even with the slowdown, Pennsylvania expects to produce 3.5 million megawatt-hours from wind in 2013, assuming a 30 percent capacity factor from the commonwealth’s 400-plus turbines, according to Patrick Henderson, energy executive for Gov. Tom Corbett.

Policies and agreements are in place to help the industry continue to financially grow in the upcoming years.

“Wind energy benefits from Pennsylvania’s Alternative Energy Portfolio Standards law, which requires utilities to buy a certain amount of their electricity from alternative and renewable energy sources,” said Henderson. “Gov. Corbett is committed to implementing this law. Additionally, earlier this year Pennsylvania joined with other Great Lakes states on a Wind Energy Memorandum of Understanding. This MOU is intended to bring states together to collaborate on issues such as permitting and electric transmission.

“Additionally, Pennsylvania is one of the few states with fully competitive electric choice markets. This competition provides valuable avenues for all sorts of generators to market their product, while providing lower cost energy to Pennsylvania consumers. Our embrace of competitive electric markets is key to the success and sustainability of wind energy.”

Those policies have helped spur local wind development, including construction of the Patton Wind Farm, an operation scheduled to go online by the end of the year.

The facility’s 15 turbines are spread across 2,700 acres of farmland in Elder, West Carroll and East Carroll townships.

“Some of the farmers said they’re harvesting the wind instead of grain,” said state Rep. Gary Haluska, D-Patton, from the 73rd district.

Property owners receive reimbursement for having turbines or access roads on their properties.

“As a landowner and lease-holder, all of us are looking forward to the revenue that will be generated,” said Martin Yahner, whose property, Yahner Brothers Farm, has two windmills on it. “We looked long and hard at this opportunity before we signed.”

Wind companies also make impact fee payments to municipalities.

Adams Township receives approximately $130,000 annually from EverPower, which operates Highland Wind Project and Highland North Wind Farm, sites built upon abandoned strip mines. The additional funds have enabled Adams to hold the line on taxes for every year since the windmills were installed.

“It goes right into our general fund,” said Adams Township Supervisor B.J. Smith. “It’s in our budget. ... It helps us to do our roads.”

Click here to subscribe to The Tribune-Democrat print edition.

Click here to subscribe to The Tribune-Democrat e-edition.