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A key tax credit for renewable energy production is set to expire at the end of 2012, but congressmen are already proposing an extension during an unfavorable political climate.

The federal Production Tax Credit makes wind and other renewable energy comparable in price to electricity derived from coal and natural gas by giving generators 2.2 cents per kilowatt-hour. Reps. Earl Blumenauer, D-Ore., and Dave Reichert, R-Wash., earlier this month introduced a bill to extend the PTC for four more years.

Booming and busting

The renewable energy Production Tax Credit is a per-kilowatt-hour tax credit for electricity generated by qualifying energy resources such as wind, geothermal and biomass. The PTC originated in 1992 and has been renewed several times; however, it also has expired on three occasions, resulting in a 鈥渂oom-and-bust鈥� cycle.

The PTC expired in July 1999, and later was extended through 2001. The PTC expired again, but was extended in March 2002. The PTC expired for a third time at the end of 2003 and was not renewed until October 2004, when it was extended through 2005. The credit has since been extended several times, but is set to expire at the end of 2012.

U.S. Reps. Earl Blumenauer, D-Ore., and Dave Reichert, R-Wash., on Nov. 2 introduced the American Renewable Energy Production Tax Credit Extension Act, or H.R. 3307, which would extend the PTC through 2016.

Oregon Gov. John Kitzhaber last week joined a coalition of approximately two dozen governors asking Congress to extend the PTC, but the salience of renewable energy subsidies is being questioned, cash is short and even some wind advocates are becoming tired of the tax credit’s boom-and-bust nature.

The PTC was introduced in 1992, but has been extended mostly in one-, two-, or three-year increments. It has expired on three occasions, each time leading to a drop in installations 鈥� ranging from 73 percent to 93 percent 鈥� the following year, according to Derek Schlickeisen, a spokesman for Blumenauer.

鈥淏usiness and labor leaders approach us all of the time to say we must have a consistent policy to create market certainty for wind manufacturing in the U.S.,鈥� Schlickeisen said. 鈥淲e’re coming out of the worst economic recession of our lifetimes, and another expiration (of the PTC) or even a delay now would cripple job growth.鈥�

But John Chase, vice president of government relations at , says that the climate in Washington, D.C., where he is lobbying for the extension of the PTC, is hostile toward all tax credits because of the country’s larger financial woes.

鈥淭here are more concerns over increased spending overall, and all tax credits in general,鈥� Chase said.

Most politicians this week are focused on the gridlocked 鈥渟uper committee鈥� 鈥� a special 12-member group tasked with reaching agreement by Wednesday on a plan to reduce the deficit by at least $1.2 trillion.

鈥淚 worry about the overall budget climate,鈥� Chase said.

Vestas’ North American headquarters is in Portland, and the company recently invested nearly $1 billion to open new manufacturing facilities in Colorado.

Rep. Mike Pompeo, R-Kan., earlier this month introduced a bill 鈥� the Energy Freedom and Economic Prosperity Act 鈥� that would eliminate subsidies for renewable-energy projects altogether. Pompeo says the legislation could save up to $90 billion over the next 10 years.

Some outspoken proponents of wind energy say that because of instability caused by the Production Tax Credit, it should be abolished in favor of alternative incentives.

鈥淭he Production Tax Credit is not the only way and it is by far not the best way, but it is the way that we as Americans have done it,鈥� said Paul Gipe, a California-based author and a wind energy advocate. 鈥淔eed-in tariffs are far more equitable and fair than the Production Tax Credit and all tax subsidy programs we have in the U.S.鈥�

The effort to lobby for an extension of the tax credit will focus heavily on manufacturing jobs. The wind industry supports 3,000 jobs in Oregon and is worth $12 million in state property taxes, according to Schlickeisen.

A nonpartisan coalition of manufacturing, farm and business interests last week endorsed the four-year extension, saying that the looming expiration is already leading to job losses.

鈥淭he impact on jobs will be significant 鈥� there’s a lot more at stake than there has been in the past,鈥� Chase said, adding that domestic turbine manufacture has increased from 20 percent in 2005 to 60 percent now. 鈥淭he manufacturing presence is growing 鈥� not just by Vestas, but all throughout the industry.鈥�

But Vestas executives have announced that if the PTC expires, the company will cut global capital costs and make 鈥渇urther adjustments鈥� to its U.S. operations, probably at its Colorado manufacturing facilities. Vestas spokesman Andrew Longeteig said it’s too soon to tell how expiration of the tax credit would impact the company’s operations in Portland.

鈥淲e’re just focused on continuing to sell our products here in North America, and hiring carefully in accordance with our business needs as well as in relation to market demand,鈥� he said. 鈥淭hat’s what we can control in our region right now.鈥�