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This Week in Clean Economy: Wind, Solar Industries in Limbo as Congress Set to Adjourn

No word yet on the future of a pair of key clean energy subsidies. America's first offshore wind farm is shelved, and E.V. sales are missing targets.

Dec 16, 2011
San Gorgonio Pass Wind Farm in Riverside County, Calif., near Palm Springs

America's wind and solar industries are stuck in limbo, waiting anxiously to hear if Congress will extend a pair of key subsidies. But Washington, which is emptying out for the holidays, is almost certain not to ease their worries soon.

The solar industry is fighting to renew the 1603 Treasury grant program, a popular incentive that gives renewable energy developers cash payments worth up to 30 percent of their project costs in lieu of future tax credits. The program is particularly attractive to smaller solar startups and companies that struggled during the recession to raise cash for their capital-intensive projects. The subsidy is slated to sunset at the end of the year.

At the same time, the wind industry is scrambling to extend a production tax credit (PTC), which it says is crucial for wind power to compete with coal. The tax credit pays wind farm owners a considerable 2.2 cents for every kilowatt-hour of energy it produces during the first decade of operation. 

Both have lapsed before—the PTC three times since it was introduced in 1999. The three-year-old 1603 grant nearly expired last year before Congress approved a one-year extension in a larger tax deal. Each time the PTC ended, wind installations dropped by at least 70 percent compared with the previous year, sparking job losses, according to industry estimates.

This time the cuts would put even more jobs at risk, advocates for both the wind and solar industries say. As subsidies keep bringing more solar and wind projects online, a workforce of manufacturers, engineers and construction workers is emerging to match demand.

There are options for keeping the subsidies alive, though none seem likely to pass the Republican-controlled Congress, which has been critical of Pres. Obama's efforts to bolster the clean energy economy. On Friday, Senate Democrats said they were still trying to fold the 1603 grant, the PTC and a cleantech manufacturing tax break into a catch-all bill to extend the payroll tax cut for workers that expires on Dec. 31, Bloomberg reported.

(Editor's Note, 12/17/2011: The compromise payroll tax deal reached by the 112th Congress on Friday night and approved by the Senate on Saturday did not include measures to extend the 1603 Treasury grant program or the production tax credit.)

Bleak prospects didn't stop lobbyists from making last-ditch appeals to lawmakers and the public this week.

A report released Monday by the American Wind Energy Association and Navigant Consulting, a global consultancy, said without the PTC, investments in wind power would fall from $15.6 billion in 2012 to $5.5 billion in 2013. Jobs across the U.S. wind supply chain would drop from 78,000 to 41,000 over that same period.

(The PTC doesn't expire until Dec. 31, 2012. But to qualify for the subsidy, new wind farms would have to be up and running before the 2012 cutoffan unlikely prospect. Even if projects broke ground today, the permitting, siting and construction processes would take more than a year, the New York Times reported.)

Also this week, a report  by the Solar Energy Industries Association (SEIA) and Boston-based GTM Research said 450 megawatts of solar rooftop installations were added in the third quarter this yeara record 140 percent jump over last year. The boom was largely due to the 1603 program, solar backers said.

"If this program is allowed to expire, projects will stop on Jan. 1," Rhone Resch, president and CEO of SEIA, told reporters on a Wednesday conference call, adding that many new jobs are on the line. Resch cited an October report that found a one-year extension of the cash grant would create an additional 37,000 solar jobs in 2012, a 40 percent addition to the current solar workforce.

But not everyone is buying those claims.

Robert Lahey of Ardour Capital, an investment bank, told Renewable Energy World that rising demand for solar projects would be sufficient to lift the market, suggesting the industry may even be better off without it. "While the [1603 grant] structure was friendly to the business community, the uncertainty and short period was not," he said.

NRG Energy Pulls Plug on America's First Offshore Wind Project

In the fledgling U.S. offshore wind industry optimism is waning fast.

On Monday, the New Jersey-based utility NRG Energy said its subsidiary NRG Bluewater Wind would indefinitely delay plans to build a $1 billion, 450-megawatt project off the coast of Delaware. The project was expected to be the nation's first offshore wind park.

That wasn't all. On Tuesday, NRG Energy said it would dump its proposal to build a second project off New Jersey and would sell off its wind business altogether.

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