A production tax credit for the wind power industry expires Dec. 31, but it already has taken a toll on Hall County’s ZF Wind Power, a $98 million plant that opened last year amid international fanfare.
“The timeline to install new turbines is about six months and so ... you can do the math,” said Elizabeth Umberson, president of 1925 New Harvest Drive, off Calvary Church Road.
The approaching deadline has had a “chilling” effect on orders, causing them to drop dramatically.
“We were supposed to be at full production levels, with a staff of 250, and we’re at 160 today,” Umberson said. “And we’ve capped that.”
The plant’s opening in Sept. 27, 2011, drew a crowd of more than 200 people, with company representatives from Germany and a variety of state and local dignitaries, including Gov. Nathan Deal, in attendance.
Also speaking at the event was Johnny Hoy Henriksen, senior vice president with Vestas, which receives ZF gearboxes at its Colorado wind turbine plant.
The expiring tax credit gives wind manufacturers 2.2 cents for every kilowatt hour produced, said Jennette Gayer of Atlanta-based Environment Georgia.
“It assumes that wind (energy) is going to be a little bit more expensive, so to help encourage manufacturers to build turbines and feed into the (electricity) grid, it gives a small incentive per kilowatt hour to do so,” she said.
“It’s an unfortunate situation for a couple types of renewables. We see this in solar, as well, where there is not this kind of long-term, locked-in guarantee of incentives,” Gayer said.
“What you will see is the industry will grow and there is something in place, but the incentives really aren’t there long enough to get the industry on its feet so that it doesn’t need incentives.”
The production tax credit is significantly different than some other renewable energy incentives, Umberson said.
“The deduction in the cost of the electricity per kilowatt — you don’t get that incentive until the turbine is erected,” she said. “It’s not like you’re waiting on something to happen. The turbine has to be erected and then the company that does the turbine gets the credit on the electricity.
“People think all incentives are the same, but, of course, they’re not.”
Umberson said she is contacting U.S. lawmakers about the issue.
“The senators had actually proposed an extension to the tax credit because it is a jobs program,” she said. “There are several thousands jobs in the U.S. that are tied to the wind industry, which is much more mature than the solar industry.”
Vestas has announced it would cut 1,600 jobs because of the tax credit expiring.
“What I’m hoping is (Congress) will reinstate the (credit) and that we will have some kind of recovery in the second half of 2013,” Umberson said. “I don’t know if we’ll get anything before the November elections.”
She dismissed critics who pit one form of energy against another.
“We need all forms and renewable energy is a good form of providing electricity that’s getting cheaper every year,” Umberson said.
A permanent incentive would be nice, she said.
“That’s what coal has, that’s what nuclear (energy) has — their incentives are built into the tax code,” Umberson said. “Absent that, what I’d like to see is a longer-term incentive that phases out over time.
“This all-or-nothing one day to the next is crazy. If you want companies like ZF to come and invest $100 million — which we did and now we’re sitting here watching our investment dry up — that’s not a very good picture to paint to (try to attract) other companies.”
Gayer said her organization also is prepared to “call on our congressional delegation to step up and vote for an extension of these tax credits.
“While the industry has already taken a hit, they’ll take a much larger hit if the tax credit is ultimately not renewed in December.”
Both of Georgia’s Republican senators, Johnny Isakson and Saxby Chambliss, have said they are planning to look at the tax credit in light of the expiring credits and deductions that take place Dec. 31 — widely known as the “fiscal cliff” because of the potential collective impact on the economy, including triggering a recession.
Isakson “supports renewable energy, such as wind and solar, but he is keeping all options on the table for the upcoming tax reform debate,” said his press secretary, Lauren Culbertson.
Said Chambliss: “The merits of renewable energy tax credits should be reviewed within the context of broader national energy and tax policy.”
In addition, Environment Georgia called on leaders in Congress to extend the offshore wind tax credit before it expires at the end of the year.
“People in this state think Georgia doesn’t have wind potential,” Gayer said. “It has great potential for wind off the coast and we could be big players in the wind (industry), and the great side effect of that is it creates jobs.”
And Georgia has a number of manufacturers — most notably ZF — that would benefit from offshore wind power.
“Imagine what we could do if start tapping our wind power and helping these industries to grow,” Gayer said.
Environment Georgia says it also has urged Deal to take steps to add Georgia to the Atlantic States Offshore Wind Consortium.
Through spokesman Brian Robinson, Deal said studies show the current technologies available won’t work in Georgia’s environment.
However, he said he believes “when the markets and the technology advance further, we believe there will be a day when wind energy is a viable option for our state.
“Georgia will start using wind energy when the prices are right and the technology is right for the unique nature of our wind energy off the coast.”