Though Congress’ extension of the wind Production Tax Credit is being highly lauded, it may only be enough to revive — not save — the wind energy industry, a growing source of jobs in Colorado in the past five years.
Congress passed the plan Tuesday to avoid the fiscal cliff, which averted planned tax increases and spending cuts that could have thrown the country back into recession. Within the plan was a one-year extension of the wind Production Tax Credit, a government subsidy that has been used to prop up the growing wind industry.
Though it is only a year-long extension, it could be seen as much as a three-year extension, said U.S. Sen. Mark Udall, D-Colo. The extension covers any project that is started in 2013.
“So if you put a shovel in the ground on Dec. 31, at the end of this year, the tax credit will apply, in effect a two-year extension, and some might argue it would take the form of a three-year extension because some
projects take more than a year” to get off the ground, Udall said Wednesday.
That also will give Congress time, Udall said, to potentially work on a plan to phase out the credit over time.
The credit is 2.2 cents per kilowatt-hour of electricity a wind farm produces and is paid for 10 years to the wind farmer. The expected cost of the extension is projected at $12 billion in that time.
Throughout 2012, Vestas Wind Systems steadily trimmed its workforce in Colorado and abroad with every unanswered plea for renewal to Congress. Vestas laid off about 500 employees in Colorado, citing uncertainty over the impending expiration of the tax credit.
But even with the extension, Vestas remains committed to trimming another 2,000 people from its global payrolls through 2013.
“Vestas adjusted the company’s workforce in 2012 based on the PTC not being extended,” according to a company statement released Wednesday. “The extension of the PTC does not affect Vestas’ projections to deliver about 5 gigawatts this year and to employ about 16,000 people by the end of 2013.”
At present, the company has about 18,000 employees, trimmed from roughly 22,000 a year ago.
Those in the industry laud the extension as a job saver, however, especially because it makes any project started in 2013 eligible for the credit. The American Wind Energy Association says the extension would save 37,000 American jobs. In Colorado, the industry supports from 4,000 to 5,000 direct and indirect jobs, according to the Colorado Energy Office.
Orders for 2013 at Vestas, for example, slowed considerably with the expectations that the credit would expire at the end of 2012.
Vestas decided in the fall to further intensify its cuts through 2013 to ensure they could react “fast to the uncertain market development we expect in coming years.” In 2013, reported Andrew Longeteig, a company spokesman, Vestas expects to save an additional $198 million, and will have saved $527 million since 2011.
“To a large extent, the global layoffs in 2013 are due to already-planned reductions, employees working through the termination period as well as temporary contracts not being renewed,” Longeteig said.
“Any additional orders that result from the extension represent a modest upside potential in the U.S. market.”
Vestas has four manufacturing plants in Colorado, three in Weld County. The facilities are the country’s only manufacturing source for the Danish company. Through 2012, Vestas cited an intake slowdown because of uncertainty on congressional renewal of the credit.
Officials say Congress could take the next year to hammer out a “phase-out” plan to let the wind industry sink or swim on its own.
U.S. Rep. Cory Gardner, R-Colo., said discussions are under way with the House Ways and Means Committee seeking a wind energy proposal for a ramp-down.
“They are most likely going to spend most of this next year dealing with either the PTC going away or being ramped down,” Gardner said. “I certainly think the wind industry needs to get away and off of the PTC. Even the industry realizes they need to get off of it.”