Wind power tax-credit sunset would hit state 

WASHINGTON – Washington state sometimes has too much of a good thing: power.

In a state that relies heavily on water and wind for its electricity, Mother Nature can be too generous, and it has been causing headaches for energy producers.

Wind producers are irked that the Bonneville Power Administration, a federal agency, can cut off wind generation when there’s a surge in river flows, resulting in too much hydropower. The agency took that step several times during a two-month period earlier this year.

Against this backdrop, one of the state’s Republican congressmen, Dave Reichert of Auburn, wants to extend tax credits for more wind power through 2016. Unless Congress acts, the subsidies will expire at the end of 2012.

But with Congress facing a big test in cutting the federal deficit by at least $1.2 trillion in coming weeks, Reichert’s plan is causing division in his own party. Opponents say it’s time for the federal government to stop subsidizing all energy projects and to let the marketplace decide which ones succeed.

Reichert rejects the argument.

“This bill isn’t about picking winners or losers,” he said. “This bill is about giving America every opportunity we can give those businesses out there to innovate and to surge ahead in this race for the next new energy.”

Reichert called it “a big issue for the country” and particularly for his state, where “we’re very sensitive to clean, renewable, environmentally friendly energy.”

FIFTH IN WIND POWER

In 2010, wind accounted for nearly 5 percent of the state’s power, producing enough energy to power 625,000 homes. The state, an early leader in the industry, now ranks fifth in wind power installation, behind Texas, Iowa, California and Minnesota. And demand for alternative energy projects is growing, particularly after the state’s voters in 2006 decided to require utilities to get at least 15 percent of their electricity from renewable energy by 2020.

Backers of the tax breaks say that failure to extend them would lead to a quick slowdown of wind projects. But with the industry facing far greater scrutiny in the state and on Capitol Hill, many predict it will be a much tougher sell this time around.

There are plenty of skeptics.

In Congress, opponents have stepped up their criticism of wind subsidies since news broke that the Energy Department gave preferential treatment to Solyndra, a California solar company that collapsed after getting a federal loan guarantee.

“The Solyndra scandal has demonstrated the danger of government interference in energy markets,” said Republican Rep. Mike Pompeo of Kansas, who is leading the effort to get rid of subsidies for renewable energy projects.

And in this state, Chris Gleason, community and media services manager for Tacoma Public Utilities, said the wind industry “is no longer in its infancy” and that tax subsidies have distorted the market, leading to overdevelopment of wind power in the Northwest.

“It is legitimate to explore at what point in the development of any industry … the subsidies should be reduced or withdrawn,” Gleason said.

Proponents of wind power say the out-of-whack supply and demand this year is a temporary situation that can be worked out and that it should not be used as ammunition to end subsidies to the industry.

“The substance of the situation is: Does this say anything about the need for wind energy? And we would say that it doesn’t,” said Peter Kelley, vice president for public affairs for the American Wind Energy Association. “It’s a short-term bottleneck.”

In the long run, scientists hope to come to the rescue: Since wind power can’t be saved for future use, researchers at the U.S. Department of Energy’s Pacific Northwest National Laboratory in Richland are trying to use different materials to invent new batteries to store the excess electricity.

One of the key questions: Where should the batteries go?

“Do you have really big batteries closer to the generation point, or do you have smaller batteries in the neighborhoods closer to the homes, or some combination thereof?” said Carl Imhoff, electricity infrastructure sector manager at PNNL, who was in Washington, D.C., last week for an energy conference. “I think we’ll see lots of different new innovations, storage being one of them.”

Reichert, who introduced his legislation with cosponsor Democratic Rep. Earl Blumenauer of Oregon, called the tax credits “job creators” across the nation. The bill would give a four-year extension of tax credits for wind power, hydropower, geothermal power and other forms of renewable energy.

$900 MILLION A YEAR

Reichert’s office had no cost estimate for the legislation, but the wind subsidies alone are estimated to cost roughly $900 million a year in 2011 and 2012. Supporters say it’s well worth it because the tax breaks have resulted in more than $17 billion a year in private investment.

Government subsidies have turned wind power into a fast-growing business.

In the past six years alone, U.S. production of wind turbine components has grown 12-fold and now includes more than 400 facilities in 43 states, according to the American Wind Energy Association. It said the industry now supports 75,000 jobs across the country, and that could grow to 500,000 in the next two decades.

The industry still has strong backing from the White House. At an energy conference in Baltimore last month, Interior Secretary Ken Salazar boasted that the U.S. is one of the world’s leaders in wind energy, producing 21 percent of the overall capacity.

Paraphrasing Mark Twain, Salazar said that “reports of our nation’s flagging commitment to clean energy are greatly exaggerated.”

Pompeo said his bill – called The Energy Freedom and Economic Prosperity Act – would save up to $90 billion in subsidies over the next 10 years. In a letter to his colleagues asking for support, he said it’s time for Congress to correct “decades of taxpayer-funded handouts to industries” that can survive on their own.

“Wind, solar, biomass and other sources of energy all have shown great promise, but it is high time for energy sources to demonstrate their value on the open market – without government interference,” Pompeo said.

At a hearing of the House Water and Power Subcommittee in September, Republican Rep. Tom McClintock of California said that the federal government had taken “extraordinary steps to force wind and solar electricity on American consumers, while spending untold hundreds of billions of dollars on direct subsidies and loan schemes.”

Kelley said utilities are eager to have wind as part of their electricity mix, partly because costs have declined by 40 percent in the past five years. He said the most recent attacks against the wind industry are coming from people and groups linked to the fossil-fuel industry who are watching wind consume a larger share of the electricity market.

“You’ll be exposed to a lot of this, and you’ll see this for the next several years, I imagine, as we grow” Kelley said. He said the industry is ahead of schedule in its goal of capturing 20 percent of the electrical grid by 2030.

Wind producers sued the Bonneville Power Administration for shutting down the wind turbines when it had too much hydropower this spring. From May 18 to July 10, the agency displaced 97,500 megawatts of wind energy, forcing producers who were connected to BPA’s grid to lose 5.4 percent of their total production, said BPA spokesman Doug Johnson.

After studying the issue, the BPA concluded that there is a 1-in-3 chance of the water levels getting too high in any given year.

The BPA is trying to negotiate a settlement with the wind producers, but the situation is tricky. When water levels are too high, the BPA sends more water through its hydroelectric turbines. But the agency must be careful because too much excess water can increase gas levels, causing air bubbles that hurt the fish.

Johnson said the BPA tried to give away some of its excess electricity, but he said the agency could not work out any deals because of “operational or economic barriers.”

“Our marketing folks were continually looking for potential deals,” he said.