I like to dream.
I enjoy the thoughts of battling alien monkeys and flying in ships made of sunflowers. I even relish the dreams in which I wake up to find that I am still dreaming. So, when I woke up last Friday from a dream of the US Congress passing an extension to the PTC, I knew I needed to get some thoughts out of my head.
One of the biggest questions on the mind of environmental policy makers, and, apparently, a 22-year old intern at GE who recently started a blog, can be boiled down to a simple Shakespearean offering: “For Free… or PTC?” OK, well maybe I didn’t jot down Shakespeare’s quote perfect from English class, but the question is at the crux of renewable energy policy in the US. This is my attempt to make some sense of what has become an unnecessarily convoluted debate.
The Production Tax Credit (PTC) is a federal tax credit for the production of electricity from renewable energy sources such as wind, solar, geothermal (and even anaerobic digestion!) For example, the PTC gives a site 2.2 cents/kwh for electricity produced via wind turbines. Started as part of the Energy Policy Act of 1992, the PTC has been extended many times over the past 20 years, with notable gaps in between for which it was allowed to expire. These gaps, however brief, have lead to what is called a “boom-and-bust” cycle for the renewable sector. The American Wind Energy Association (AWEA), which has lobbied extensively on this issue, published a recent report featuring the following chart for the wind energy sector over the past decade:
Wind Sector Boom-and-Bust Cycle
The key aspect of this cycle is that in the years for which the PTC is upheld, the annual installed wind capacity skyrockets. That is, not only is their repeated demand for the technology, but that demand is increasing each year. This growth in the industry is natural growth, not ramped up by expanding a subsidy. Put in a different way, without any increases in subsidy, the industry is still able to produce an increase in installation rates.
To people who say that we shouldn’t pass the PTC because it will comfortably prop up the renewables industry with benefits and safeguards: you couldn’t be further from the truth. What do you think engineers are doing in the drawing room, designing turbines with lower capacity factors? Do you think solar manufacturers are trying to find materials with lower absorption coefficients and higher cost? Without consistent cash flow, it becomes very difficult for large companies to invest in research and for small companies to find traction with investors. Unlike conventional power sources, renewable energy is young and has immense potential to grow into a dominant player in the market. You don’t deprive your child of milk in a growth spurt to toughen them up do you?
If you google PTC extension you’ll be able to find more than enough articles, government statements, pictures of Sarah Palin lookalikes, blog posts, and videos about how it’s time to make the right move. Despite all this positive media, for me the most entertaining/infuriating remarks are the anonymous comments found at the bottom of these pages. One of them reads:
Before we give wind credits…go back and bring programs and credits back for things like windows, doors, and insulation. This too, will create jobs…and help conserve energy. Not to mention, the home improvement people will have jobs, the big boxes will have customers, and the window and door manufacturers will employe people.
Uh… what? That’s your argument against investing in our country’s energy future? The home improvement industry?! I wonder about 1) how the two could possibly be mutually exclusive, 2) the required credit structure for the government to gives home improvement incentives, and 3) whether this guy posts the same comment on every blog.
Honestly, I’m not surprised that the PTC was able to find its way into my dreams given that I’m spending the majority of my days at Renewable Energy HQ. Since last Friday, I started keeping a tally of the number of times the PTC has been mentioned by someone at work. The count is at 24.
I do think that Congress will follow President Obama’s push to extend the PTC till 2016, but when? The urgency of the matter could not be more tangible. The delay in government action is forcing the renewables industry to lose thousands of installations. With some big companies facing such declining demand, jobs are always in danger. I believe Congress will get the message sooner than later and then we’ll be able to put this mess all behind us. And this time, there will be no bust to follow the boom.
But then again, I like to dream.