Wind Energy Tax Credit: More Hot Air or Key Job Creator?

Obama goes to bat for wind energy in Iowa.


In a state where wind turbines are almost as common as corn fields, President Barack Obama unleashed a fury of criticism at GOP opponents Mitt Romney and Paul Ryan over their energy policy in Iowa this week, underscoring the importance of "homegrown" energy in a state that relies on wind power for almost 7,000 jobs, according to the administration.

The thorny debate between the two camps centers partly on a 2.2-cent tax credit given to wind energy companies for every kilowatt hour of energy they produce. Critics of the tax credit, including Romney who has said he'll let the tax credit expire, argue that the government should reduce regulations and take a more free-market approach. Proponents say the credit helps create jobs and diversifies the country's energy supply.

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Politicians of all stripes have traditionally supported ethanol subsidies ahead of the first-in-the-nation caucuses, and now Democrats see Romney's "anti" stance on the wind-energy tax credit as a potential weak spot for the campaign in Iowa, an all-important swing state.

Here's a look at what's at stake regarding the wind energy tax credits:

2.2. The federal renewable energy production tax credit (PTC) provides an income tax credit of 2.2 cents/kilowatt hour for the production of electricity from utility-scale wind turbines, and is set to expire on December 31, 2012. Whether or not to continue the credit for new turbines is at the crux of the spat between the two parties. Existing turbines will continue to benefit from the tax break for their allotted period of time.

Without the tax credit, chances are that fewer turbines will be produced and installed. That could have devastating ripple effects on jobs, according to some experts. Last time the PTC was allowed to expire in 2004, installations of new wind turbines dropped as much as 93 percent, according to the American Wind Energy Association, throwing the industry into a perpetual boom-bust cycle that has stunted its growth.

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But not everyone believes the expiration of the PTC will be the industry's death toll. Already supported by large government subsidies—at times more than 60 percent government interest, according to some estimates—wind energy projects and producers also enjoy mandates that require at least some of the state's energy to come from renewable sources, including wind, in 26 other states.

But subsidies won't sustain an industry that can't stand on its own without the government. Just look at Europe, whose governments are now turning away from heavy subsidies for alternative energy production, says Dan Kish, senior vice president for policy at the Institute for Energy Research.

"Europe is backing away from subsidies as fast as they can because they realize they're running out of money," Kish says. "Once the burden is shifted [from the government to the consumer] utilities are going to have to start charging more."

37,000. That's the number of jobs the Obama administration says are at risk without the energy tax credits, not a small number considering millions of Americans remain unemployed.

While on a campaign stop in Oskaloosa, Iowa, Obama underscored that 7,000 Iowans are employed thanks to the wind power industry and rebuffed claims that jobs in the alternative energy field were volatile and unpredictable.

"These jobs aren't a fad, they're good jobs and sources of pride we need to fight for," Obama said according to his campaign.

Obama also pushed the issue during a campaign stop in Pueblo, Colo. last week, saying:

"…it's time to stop spending billions in taxpayer subsidies on an oil industry that's already making a lot of profit and let's keep investing in new energy sources that have never been more promising. That's the choice in this election. That's why I'm running for president."

Clean, renewable energy might not be the only thing the renewal of the PTC could bring. According to a December 2011 estimate, wind-energy supported employment could peak at 95,000 with a four-year extension of the PTC, versus just 49,000 without, according to the American Association of Wind Energy.