Federal tax credits for renewable power plants, including wind turbines, expire at the end of the year. If Congress doesn't extend the tax break, new wind farms proposed for 2009 won't be as profitable as prior farms and could be canned.
"Every year in the past when the production tax credits expired, the market has evaporated," said Tim Howell, a managing director at GE Energy Financial Services, which is making the investment. The tax break might expire just as the Texas wind industry is spinning at full speed. Developers have proposed building 46,623 megawatts of wind power capacity within the Texas power grid alone.
That's a massive amount, equivalent to more than half of the existing power plant capacity within the grid operated by the Electric Reliability Council of Texas. Last year, Texas boosted its wind power capacity 59 percent to 4,356 megawatts, enough to power about 1 million homes if the wind blows a third of the time.
The past two times the federal tax credit expired, wind development in the U.S. dropped to zero the following year, according to Mike Sloan with the Wind Coalition. The production tax credit program gives renewable energy providers a credit of 2 cents per kilowatt-hour of electricity they produce.
Without the advantage, many wind farms cannot compete with the cheaper power from coal or nuclear plants. Losing the tax credit might please people who complain about the noise and giant wind equipment around the state, as well as the danger some windmills pose to birds. But it would disappoint wind proponents, who like the pollution-free wind electricity.
GE Energy Financial Services, which invests in energy projects, expects to finish two new wind farms in Texas and Illinois by the third quarter of this year, ahead of any potential tax credit expiration. GE is developing the projects with Invenergy Wind LLC.
The farm in Texas, east of Lubbock, will have 100 wind turbines for capacity of 150 megawatts. Mr. Howell declined to say how much the project will cost. Wind developers who can't finish their projects this year could face a second problem. Global demand for wind turbines is so hot that developers must order the equipment months in advance.
Further, a lapse in the tax credit could scare away any wind equipment manufacturers that might consider building factories in the U.S., Mr. Sloan said. The federal tax credit isn't the only government aid for wind power. Texas requires power companies to buy renewable power each year, supporting the industry.
And if Congress regulates greenhouse gas emissions, as many observers expect, renewable power plants would gain an advantage over coal and natural gas plants. A bill to extend the production tax credit is making its way through Congress now. The bill to extend the credit until 2012 passed in the House in February.
"I'm hopeful it will pass, but all bets are off because it is an election year," Mr. Sloan said.