Iowa’s wind energy producers and manufacturers are scrambling to finance new projects in the next two months because they don’t know if the Federal Renewable Electricity Production Tax Credit they rely on heavily will be available after then.
MidAmerican Energy, the nation’s largest wind power generator among rate-regulated utilities, has no plans beyond December to expand its wind energy projects, company media relations manager Tina Potthoff said.
Trinity Structural Towers Inc., which has a plant in Newton, plans to diversify its operations if the subsidy is not extended, a company official asking not to be identified told IowaWatch. And ACCIONA Wind Power North America, which builds turbines and operates a plant in West Branch, probably will have to shift sales to overseas, company CEO Joe Baker said.
“The industry needs an extension of the PTC (production tax credit), and then a clear and predictable pathway to draw-down, and eventually eliminate the incentive,” Baker said. “The short-term renewal strategy creates uncertainty in the market place and an inability to plan long-term.”
Baker said his company has no plans to lay off any of its 100 employees. But wind turbine manufacturing plants in Cedar Rapids and Fort Madison have, even though the tax credit does not expire until Dec. 31.
This wind tower blade was photographed north of Alta, Iowa, in September 2012. (IowaWatch photo by Robert Maharry)
The uncertainty in this multimillion dollar industry in Iowa that employs 6,000 to 7,000 workers comes, in large part, from the presidential election, in which Iowa is a highly competitive swing state with a lot to say about who wins.
President Obama has vowed during his multiple stops in Iowa to fight for a credit. Republican presidential candidate Mitt Romney has said he would let it expire and allow all forms of energy compete on their merits.
Harold Prior, the association’s executive director, predicts that failure to extend the tax credit will stifle wind industry expansion in the short term. “We’ve already seen 600 people get laid off at the major turbine production companies, and that doesn’t even account for smaller manufacturers who aren’t as well known,” Prior told IowaWatch. “We could lose up to 3,000 jobs in Iowa and 37,000 nationally if the credit is not extended.”
To see the interactive map of national wind production, click here.
The Obama campaign has criticized Romney in Iowa for opposing a credit extension. “We want an ‘all-of-the above’ energy portfolio,” Liz Purchia, the Obama campaign’s Iowa press secretary, said in an interview. “We’d rather be getting our energy from the Midwest than the Middle East.”
Shawn McCoy, Romney’s communications director in Iowa, declined to talk specifically about how his candidate’s plan would affect Iowa or if Romney would be willing to compromise on the credit, but sent IowaWatch a list of Romney’s energy proposals.
Wind towers in a row, generating power north of Alta, Iowa. (IowaWatch photo by Robert Maharry)
That list calls for opening areas for offshore drilling, letting states control onshore energy development and helping the private sector develop new energy technologies. It also calls for, among other things, allowing the Keystone XL pipeline from Canada into the United States, other cooperative energy development with Canada and Mexico, accurate assessments of energy resources, and reducing regulation on development efforts.
The document says policies for expanding energy development should apply broadly to energy sources from oil and coal mining to wind, solar, hydroelectric and other forms of renewable energy and that doing so can allow more access to all industries.
Leader in wind energy
Iowa has been one of the leading states in wind energy production, getting almost 20 percent of its electricity from wind turbines.Wind energy, produced by connecting a turbine to a generator and using spinning blades to generate electricity, has been produced in Iowa since the enactment of the Alternative Energy Law in 1983. This law, signed by Gov. Terry Branstad, required investor owned utility companies to purchase 105 megawatts of renewable energy per year.
Iowa’s congressional delegation; governors Branstad, Tom Vilsack and Chet Culver; and the Iowa Legislature have been strong supporters of the Federal Renewable Electricity Production Tax Credit and expanding wind energy production on the state level. “It’s been one of the few non-partisan issues in the Iowa Legislature,” Prior said.
A little more than 2,800 utility scale wind turbines operate across the state, according to the Iowa Wind Energy Association.
The Federal Renewable Electricity Production Tax Credit, part of the Energy Policy Act of 1992 and extended four times, gives wind energy companies a 2.2 cent per kilowatt-hour tax refund for their first 10 years of operation.
The American Recovery and Reinvestment Act, known better as the stimulus law, went further in 2009 by allowing producers to take a federal grant that amounts to a 30 percent tax break for the first 10 years after a project is built.
The stimulus law’s impact on Iowa’s wind power industry has been huge. All but $36,000 of the $270.1 million in grants renewable energy projects in the state have received under the act have gone to wind energy projects. The largest beneficiaries of the act were Barton Windpower of Kensett, with $93.4 million; Garden Wind of Zearing, with $83.6 million; and Lost Lakes Wind Farm of Milford at $55.5 million. (See accompanying list)
The American Wind Energy Association’s most recent report, issued on Oct. 17 and covering data through September 2012, showed Iowa’s 4,536 megawatts ranking third behind Texas and California in the amount of wind energy produced. That’s a slip from its previous No. 2 spot in 2011, although Iowa trails California by just 34 megawatts.
Prior estimated that Iowa’s capacity will be reach 4,700 megawatts by the end of the year.
MidAmerican Energy’s Potthoff said the wind tax credit has made projects affordable and economical for the company, which began building wind turbines in 2004. “While the end of the tax credit will not impact MidAmerican Energy’s workforce, it could very well impact our suppliers and contractors,” she said. MidAmerican operates turbines in 14 Iowa counties.
Iowa’s 7,000 wind-related jobs have been created since the mid 2000s in manufacturing, operations, maintenance and wind-related businesses. Two turbine production plants, Clipper Windpower LLC in Cedar Rapids and ACCIONA’s in West Branch, have opened where other manufacturers once operated, Prior said.
The American Wind Energy Association estimates Iowa wind project owners paid $19.5 million in property taxes in 2011. Their annual land lease payments totaled $13.5 million, and they invested $300 million in manufacturing plants for wind energy equipment, the association estimates. Although other data exist from wind power advocacy groups, state officials rely on the association’s estimates. Iowa, like other states, does not independently record that data.
Iowa’s wind energy output has increased from about 1,500 megawatts in 2008. The Iowa Wind Energy Association set goals to reach 10,000 megawatts by 2020 and 20,000 megawatts by 2035.
Still, Clipper Windpower will have eliminated 174 positions nationally by the time its layoffs are completed this fall. An exact number for how many of those were in Cedar Rapids has not been reported.
Siemens Manufacturing is to lay off 407 workers in Fort Madison, an IowaWatch review of tax credit-related news stories shows. Siemens received a $3.4 million federal stimulus grant in 2009 to help build its manufacturing plant in Fort Madison.
Neither company has responded to multiple requests for comment.
Moving to a sustainable market model
A key issue is just how much wind energy production can expand. In federal fiscal 2010, the wind energy industry received 42 percent of the subsidies and government support for energy, compared to just 10 percent for coal and 5.5 percent for oil and natural gas, U.S. Energy Information Administration data show.
Lisa Linowes, the executive director of the Industrial Wind Action Group, would like to let the credit expire because she believes costs outweigh the benefits of wind energy. Her group’s mission statement says it was formed to “counteract the misleading information promulgated by the wind energy industry and various environmental groups.”
Wind towers are part of the rural landscape in northwest Iowa. This photo was taken in September 2012 near Alta. (IowaWatch photo by Robert Maharry)
“The wind industry has built itself around the subsidy,” Linowes said. “We should let the market decide what it will produce, and wind producers will have to find a way to lower costs and be more efficient.” She went on to note that a one-year extension of the Production Tax Credit nationally would cost taxpayers $12 billion, a figure that showed up in August in a Joint Committee on Taxation report.
Prior conceded that his industry will survive in the long term if the tax credit goes away. He said wind producers will work to expand wind energy’s availability and using smart grid technology, which automates the generation of power.
“One way or another, the wind energy business is here to stay,” Prior said. “We’re going to be a growing part of the energy generation portfolio.”
Congress is in recess until mid-November. Any vote to extend the credit must wait until then.
Rob Hach, owner and founder of Anemometry Specialists in the northwest Iowa town of Alta, has become an unlikely champion for Obama’s wind energy policy. A lifelong Republican, Hach introduced the president at a campaign stop in Sioux City and attended the Democratic National Convention in August. His company, in business for 10 years and employing 29 workers, performs feasibility studies and installs solar and wind projects.
Hach favors a four-year extension of the federal tax credit, after which, he said, the industry will evolve enough to move toward a lower rate of subsidization.
Anemometry Specialists Owner/Founder Rob Hach (right) eating breakfast with President Obama at a campaign stop. (Photo courtesy of Rob Hach)
“They are absolutely feasible with an extension of the tax credit,” he said of the Iowa Wind Energy Association’s goals. “The wind energy industry will put a lot of tax dollars into local schools, farmers will have another source of income, and farm kids will be able to stick around and find jobs in the wind industry.”
Iowa farmers during the unusually dry summer have reaped some of the financial benefits of wind energy.Dave Turnquist, an Alta farmer who has nine turbines on his land, said he gets $1,700 per year for each turbine, totaling $15,300.
“It’s nothing we rely on, but it’s a little piece of the puzzle,” he said about the income. “I think wind energy is a good thing for Iowa, but it depends on how much help it needs to be viable.”
Iowa Locations that received stimulus funding for clean energy projects (2009-present)
- Barton Windpower, LLC, Kensett — $93.4 million
- Garden Wind, LLC, Zearing — $83.6 million
- Lost Lakes Wind Farm, LLC, Milford — $55.5 million
- Crystal Lake Wind III, LLC, Britt — $36.3 million
- Zachary Ridge, LLC, Allendorf — $1.1 million
- Steven A. Boevers Farm, Tripoli — $57,000
- Jeff Schutte Farm, Readlyn — $47,000
- Brian Boevers Farm, Sumner — $47,000
- DEPC Properties LLC, Cedar Rapids — $36,000
- American Railcar Industries, Fort Dodge — $5.3 million to re?equip a railcar plant for the production of steel towers for wind turbines.
- TPI Composites Inc., Newton — $3.9 million to build a 300,000-square-foot blade fabrication plant that eventually was to employ 500 workers and a 200-employee blade manufacturing factory in Nebraska.
- Siemens Energy Inc., Fort Madison — $3.4 million to build a manufacturing plant for assembly of wind turbine nacelles and hubs for wind turbines.
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