The wind industry breathed a sigh of relief Thursday night when the U.S. Senate’s proposed overhaul of the tax system avoided cutting into a subsidy relished by wind developers and utilities.
But at the same time, a handful of lawmakers in Wyoming are showing a renewed interest in increasing taxes on wind.
The state and federal measures are central to developments ongoing in Wyoming, where a handful of proposed farms could double the wind capacity in the Cowboy State.
Federal lawmakers pushing for the end of the subsidy say policy shouldn’t favor one industry over another. State lawmakers say it’s time to treat wind like Wyoming’s non-renewable resources. But, while the cost of developing a wind farm is lower than any other form of new generation, developers say in either case, their projects would take a hit.
The Senate’s plan differed from a House proposal passed Nov. 2 that immediately triggered panic in the wind industry. The House bill would force some developers, who are currently qualified for the tax credit for their nascent projects, to go back and requalify, potentially losing out on the $23 per megawatt hour of wind energy boon offered by the federal government. The proposal also effectively reduces the amount of the credit for other developers.
A representative of the American Wind Energy Association said the House proposal alone has had a chilling effect on the wind industry, one that would freeze over if the proposal actually found its way into law.
“If Congress is able to change the rules in the middle of the game they are sending a message to the market … that they can’t count on the terms of contracts they’ve signed,” said Evan Vaughan, spokesman for the association.
A number of financial firms agree.
According to Bloomberg New Energy Finance the impact of the House’s proposal could take an expected 38 gigawatts of new power through 2020 and reduce it to 19 gigawatts.
The two proposals have a ways to go before they are combined into a single bill reforming the nation’s tax system. And some influential senators have already made it clear that they would not support reducing wind incentives that are already gradually sunsetting, with a firm deadline of 2020. As part of a deal with Congress reached in 2015, many farms currently in development will keep the tax credit for 10 years beyond that deadline if they meet a number of qualifications.
Power Company of Wyoming, which is has started construction on the Chokecherry and Sierra Madre 1,000 turbine wind farm going up in Carbon County, is counting on having the full production tax credit to fill their sails when they bring their power online and try to find buyers in California and the desert Southwest. A spokeswoman declined to speculate on the House proposal so early in the process, but said the company was watching it closely.
Wyoming’s largest utility, Rocky Mountain Power, wants Congress to let the wind subsidy decline as planned. The company is hustling to spend nearly $3 billion in Wyoming repowering its wind fleet and building wind and transmission – all before the subsidy deadline.
“With the production tax credit and its existing program, we can continue to make some investments that will bring substantial benefits of renewable energy at costs that make the projects economically feasible,” said David Eskelsen, a spokesman for the company.
Rep. Liz Cheney applauded the House’s tax proposal. She said in an email that wind is important to Wyoming, which is why the House bill keeps the slow phase out of the production tax credits that were agreed on by industry and Congress in 2015.
“Moving forward, we need to ensure we are removing distortions to our energy market created by polices such as those that subsidize otherwise unsustainable projects,” Cheney said.
A spokesman for Sen. Mike Enzi said he couldn’t speculate about what would happen as the debate continues Monday in the Senate. Enzi is a member of the Senate Finance Committee.
“[The senator] will be judging amendments on their own merits,” said Spokesman Max D’Onofrio in an email Friday. “Generally speaking Senator Enzi would like to see energy sources compete on a level playing field. “
Federal winds subsidies are a sticking point for many in Wyoming, and they are at times used as a justification for lawmakers seeking an increase to the state’s wind tax. But it’s only part of their pitch.
For Sen. Cale Case, R-Lander, more wind is inevitable, and the tax is a way to soften the blow of turbines on the landscape for generations.
“I’m very resigned to the fact that we will have wind in Wyoming’s future,” he said. “Climate change will not change the wind patterns … whether it is developed now or in the future, I’m pretty sure that that energy source will be needed.”
As lawmakers in Washington decide the fate of a federal boon to the wind industry, Case and Rep. Mike Madden, R-Buffalo, are planning a measure for the upcoming budget session that would increase the wind tax from $1 per megawatt hour to $3.
Wyoming needs the revenue right now, both lawmakers agreed.
Developers say it’s a bad idea.
In an interview earlier this year, Roxane Perruso, vice president and general counsel for Power Company of Wyoming said increasing Wyoming’s wind tax will not boost revenue. It will reduce interest.
“If the projects don’t go forward, then an increase in the wind tax will have accomplished nothing,” she said.
Eskelsen, of Rocky Mountain Power said an increase in the wind tax would fall on customers.
Wyoming’s tax on producing power from wind is the only tax of its kind in the country. Minnesota also has a tax, but it is in lieu of paying full property taxes for wind farms.
According to a study from the University of Wyoming, the tax is one of the reasons Wyoming had a drought in wind development following 2010, despite phenomenal growth in neighboring states.
Madden and Case have unsuccessfully pushed for a tax increase before. The current proposal will be more modest than the quintuple increase that failed in the last legislative session.
Though wind isn’t a fossil fuel, the lawmakers want it treated like one. At least in some respects.
This go-round Madden wants to take 25 percent of the revenue from taxing wind and put it in the permanent mineral trust fund – a bucket of money from taxing non-renewables like oil and coal that’s invested to extend the benefits of fossil fuel production to future generations. It is also the second largest contributor to the state’s general fund most years.
And just as fossil fuel taxes are tacked onto the cost of our natural resources, and paid by buyers in other states, ultimately, it will be Californians bearing the burden for the tax increase, said Madden.
They want our wind. They can pay for it, he said.
It will be a tough sell this year. As hungry as lawmakers are for new revenue to make up for declines in coal, oil and gas, the budget session will be a tense and busy session. Madden’s bill will need a three-fourth’s vote to pass.
Proponents of the increase are adamant.
“[Wind] is getting cheap enough to stand on its own,” Case said. “So let’s stop linking our brain to the [federal wind subsidies] and think about how Wyoming should do this on its own terms.”