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Boom and Bust for Renewable Energy?

Tax credits central to renewable-energy development

By Heide B. Malhotra
Epoch Times Washington, D.C. Staff
Feb 25, 2008

A man examines a solar energy array developed by Taiwan's state-run Institute of Nuclear Energy Research in Taoyuan, northern Taiwan. Industry experts predict the system to become a mainstream photovoltaic product for its high conversion efficiency comparing to silicon-based solar cells by 2010. (Sam Yeh/AFP/Getty Images)
A man examines a solar energy array developed by Taiwan's state-run Institute of Nuclear Energy Research in Taoyuan, northern Taiwan. Industry experts predict the system to become a mainstream photovoltaic product for its high conversion efficiency comparing to silicon-based solar cells by 2010. (Sam Yeh/AFP/Getty Images)


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WASHINGTON—Armed with more than $9 billion in investments, the U.S. wind-power industry increased electricity production by 45 percent in 2007, bringing enough energy to power 1.5 million homes.

The latest statistics were published in a press release from American Wind Energy Association (AWEA), the national wind-energy-industry trade association.

As a whole, 2007 was a productive year for the renewable-energy industry: More than 14 new wind energy production plants have opened or are in the process of opening. In 2007, a total of 3,188 turbines were installed, with an additional 2,038 under construction throughout the United States. Texas led all states with 934 installations, and Colorado had 591, according to the AWEA 2007 Market Report.

General Electric Co. (GE) produced by far the most wind turbines, accounting for around 49 percent of all new turbine installations in the United States last year. Danish manufacturer Vestas Wind Systems A/S and German industrial company Siemens AG were also major players in the market.

"Since 2004, GE has achieved a 500 percent increase in wind-turbine productions, with its wind-business revenues exceeding $4 billion in 2007," according to a recent GE release.

Stateline Wind Energy Center, the world's largest wind farm by the number of turbines, is located on the border of Oregon and Washington. It operates a total of 454 turbines, was built at a cost of around $300 million, and has a peak capacity of 300 megawatts. On average, one megawatt is enough to power 1,000 Californian homes.

The world's largest wind farm in terms of megawatts (its capacity is 735 megawatts) is the State Horse Hollow Wind Energy Center in Taylor Country, Texas. State Horse began operations at the end of 2006 and operates 420 turbines—291 from GE and 130 from Siemens.

Renewable Tax Credits

During the past three years, wind power has become a major new energy source in the United States. Its unprecedented growth was spurred by a three-year federal production tax credit (PTC) for renewable-energy production.

The renewable-energy tax incentive provides both investment and business credits. The tax credit returns to the renewable-electricity company 1.9 cents for each kilowatt hour produced during the first 10 years of operation. An additional investment tax credit amounts to a 30 percent credit of the total project cost.

However, the output from renewable energy will decrease if such tax credits expire.

"The PTC and tax incentives for other [than wind] renewable energy sources are now in danger of lapsing at the end of this year—and at the worst moment for the U.S. economy," said Randall Swisher, Executive Director at AWEA.

Between 1999 and 2004, the renewable-energy tax incentive lapsed three times. According to AWEA and UCS press releases, the wind-power industry experiences dramatic decreases in demand whenever tax credits expire.

The PTC—set to expire in December of 2007—was renewed recently by the 109th Congress for another year. Extensive lobbying by AWEA, the Union of Concerned Scientists (UCS), various manufacturers, engineers, and others associated with the renewable-energy industry continues to push for further extensions.

The renewable-energy sector fears that while a one-year extension is a good start, it isn't enough to forecast a strong growth period. The development stage of a wind-power facility could take two or more years. Firms may think twice before embarking on a costly project without clear indications that PCT is still available.

"Extending the PTC through 2008 will allow the wind industry to continue building on previous year's momentum, but it is insufficient for sustaining the long-term growth of renewable energy," said UCS in a press release.

Creating Jobs and Opportunities

In 2007, the solar-power sector created 6,000 jobs and saved Americans over $1 million in taxes. Additionally, "this growth pumped over $2 billion into the U.S. economy," according to the Solar Energy Industries Association (SEIA) in a press release.

Another SEIA release said that Americans could lose up to 116,000 jobs and $19 million in investments in one year if the renewable-energy tax credit is withdrawn, according to information provided by Navigant Consulting.

The same research also suggests that the solar industry most likely would have to cut 40,000 jobs, and the wind industry may lay off 76,000 people.

"This study confirms the huge economic stimulative impact of extending the tax credits for renewable energy. At risk are many thousands of construction jobs, operations and maintenance jobs, and a major shot in the arm for the ailing U.S. manufacturing sector," said Gregory Wetstone, senior director at the American Wind Energy Association, in the SEIA press release.

Around 85 percent of Americans support government subsidies for renewable-energy sources, according to a survey conducted by Zogby International, a New York-based polling firm.


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