Stable policy nurtures business. Clear and predictable policy provides corporations and investors with the comfort needed to make decisions and investments. Industry grows. Factories open. Employment flourishes.
However, when policy enters into prolonged stop-and-start periods, the opposite can happen: Industries shrink. Businesses contract. Plants close.
Although the phrase “stable policy” is often repeated among industry stakeholders, it cannot be overemphasized, according to Rob Gramlich, senior vice president of public policy at the American Wind Energy Association (AWEA), which is working to extend the production tax credit (PTC) by year-end.
While efforts to reinstitute the PTC have dominated headlines, there are other notable policy measures worth reviewing. With the help of several industry watchers, NAW has compiled a short list of some new and ongoing policy decisions and graded their overall impact on the wind sector.
EPA’s Clean Power Plan: Renewable energy technologies, such as wind, stand to benefit from the U.S. Environmental Protection Agency’s (EPA) sweeping proposal to limit carbon-dioxide pollution from existing power plants under Section 111 (d) of the Clean Air Act. In fact, Tom Vinson, AWEA’s vice president of federal regulatory affairs, told NAW in June that the EPA’s plan could be the third largest driver of wind-powered generation behind state renewable portfolio standards (RPS) and the PTC.
The plan allows states to come up with their own way to limit carbon emissions using a wide array of methods, including energy efficiency, demand-side management and renewables. In addition, states can comply using multistate policies, such as the Regional Greenhouse Gas Initiative.
For the 28 states (and the District of Columbia) that have embraced an RPS, the rules will likely stimulate regulatory and market-based actions to acquire additional wind generation. However, industry watchers maintain that rules will surely be challenged in court. Still, the plan could be a significant boost for wind generation. Grade: A
Ohio’s Double Whammy: In the span of less than a week, Gov. John Kasich, R-Ohio, signed two legislative bills that all but kill utility-scale wind power in the state.
On June 13, Kasich signed a bill that freezes the state’s Alternative Energy Portfolio Standard (AEPS) for two years – making Ohio the first state to roll back its renewable energy mandate. Three days later, Kasich signed Ohio’s budget bill, H.B.483, which contained an onerous setback provision that requires wind turbines to be built at least 1,300 feet from the nearest property line as opposed to the nearest inhabited residence. In fact, some said the setback rule is more damning to state wind development than is the AEPS freeze. The fallout from the decision is already being felt, as several developers, including Iberdrola Renewables, have stepped back from wind development in the state.
The Van Wert Area Chamber of Commerce – which represents business interests in one of the counties that hosts Iberdrola’s Blue Creek wind farm – blasted Kasich on social media:
“Ohio should be embarrassed with these 2 bills. Billions [of dollars] will leave our state. And the irony is that when the coal plants begin to close and the utilities have to rebuild their energy portfolios, they will find themselves importing wind energy from our neighboring states who get it. For a governor who touts his ‘renewable energy’ policy, job growth and private sector growth, you blew this one.” Grade: F
Master Limited Partnerships: “One of the challenges faced by the wind industry is broadening the sources of capital,” explains Jeffrey G. Davis, partner at law firm Mayer Brown, adding that despite efforts to make master limited partnerships (MLPs) applicable to wind energy, the issue has not gained much traction.
An MLP is a business structure that is taxed as a partnership but whose ownership interests are traded on an exchange like corporate stocks. This provides the state and federal tax benefits of a partnership with the liquidity of a publicly traded company. Although MLPs have generated the abundant and affordable capital that has built the U.S.’ modern oil and gas infrastructure, renewable energy assets are not currently eligible to use the MLP structure.
‘The delays should be graded a D. If [tax extenders] are not addressed by December, that changes to an F.’
“The benefit of attaining MLP status,” explains David Burton, partner at law firm Akin Gump Strauss Hauer & Feld, “is being able to raise equity from the public while only incurring a single layer of tax, which would be imposed at the unit holder level only.”
Many bills have been introduced over the years to support MLPs, but the leading contender was thought to be the MLP Parity Act. The bill, which was reintroduced in April 2013 by Sen. Chris Coons, D-Del., had broad support, as evidenced by the legislation’s Republican and Democratic co-sponsors.
“There has been impressive bipartisan and bicameral support for the MLP Parity Act, but due to political gridlock, it has been unable to advance.” Grade: C+
Wind PTC: The PTC is the U.S. wind industry’s most important federal policy. The tax incentive, which pays $0.023 for each kilowatt-hour of electricity generated, has been the primary driver of wind development since it was enacted in 1992. According to AWEA, the PTC has helped U.S. wind farms provide power to more than 15.5 million homes, foster economic development in all 50 states and bring the cost of wind energy down by 43% in four years.
Without the incentive, development comes to a standstill. In 2013, due to concerns about the PTC, the U.S. wind industry installed 1,087 MW, a 92% drop-off from 2012 installations. The U.S. wind industry experienced similar declines in 2000, 2002 and 2004.
In April, the Senate Finance Committee passed the EXPIRE Act, a tax extenders package that includes a two-year PTC renewal, before sending it to the full Senate. However, the U.S. Senate blocked the bill in May by a 53-40 vote.
Burton believes the bill will eventually pass both the Senate and the House, but not until after the midterm elections in November.
“This is definitely not the end,” he told NAW in May. “After we get through the elections, these political grandstanding votes over amendments unrelated to the tax extenders will be over, and during the lame-duck session, politicians will be willing to do the right thing for the country and pass the extenders.”
Keith Martin, partner at law firm Chadbourne & Parke, says congressional delays on the extenders bill are hurting the wind industry.
“The delays should be graded a D,” Martin says. “If [tax extenders] are not addressed by December, that changes to an F.”
AWEA maintains that reinstituting the PTC is its chief legislative priority. Grade: Incomplete w
Industry At Large: Policy Report Card
Making The Grade: Assessing U.S. Policy
By Mark Del Franco
Industry stakeholders help review several state and federal policy decisions and the potential impacts on wind power.
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