Indiana wind energy industry wants longer tax credit

Officials with Indiana's wind energy industry say they are relieved by Congress' one-year extension of a tax credit but contend it will take a longer-term approach to grow the business and create jobs in the state.

The legislation signed earlier this week by President Barack Obama averting the fiscal cliff extended a wind energy production tax credit to projects that begin construction in 2013, but entrepreneur Noel Davis likened that to playing a single quarter of football instead of a complete game.

A project like the Wildcat Wind Farm going up in north central Indiana needs years to collect and analyze wind readings, perform economic studies, design a project, and secure land rights before starting to build.

"It takes a long time to do that," Davis said. "Something like that cannot be done in one year."

The law actually improves the extension to include projects that are started in 2013 rather than those that are completed, which the previous law required.

The uncertainty over long-term tax incentives has kept Indiana's wind energy industry from fully taking off despite the promise of projects such as Wildcat and the 303-turbine, 500-megawatt-capacity Meadow Lake Wind Farm in White County that have helped produce the 13th largest installed wind power capacity among states. As of Wednesday, Indiana had 930 turbines producing 1,543 megawatts of electricity, according to the Indiana Office of Energy Development.

The 2.2 cent-per-kilowatt tax credit was established in 1992, and some in Congress, including Rep. Marlin Stutzman, R-Ind., sought its elimination as a costly subsidy to an "intermittent resource."

Wildcat's developer, E-on Climate & Renewables, raced to finish its 125-turbine first phase in Tipton and Madison counties, about 40 miles north of Indianapolis, by the end of 2012 out of fear the credit wouldn't be renewed. Now that it has, it still needs to develop site plans and secure land rights for 200 more turbines in Howard and Grant counties, project manager Andy Melka said recently.

The uncertainty also has stalled job growth among manufacturers despite Indiana's manufacturing-heavy economy. Italy-based Brevini Wind announced plans in 2009 for a 450-worker factory in Muncie that would build turbine gearboxes, but it had only 70 workers by last year and has until the end this year to reach 250 jobs to receive $1.7 million in tax-increment financing revenue from Delaware County.

Brevini is among more than a dozen Indiana companies manufacturing wind energy components, but adding others will take more than one-year extensions of the federal tax credit, said Davis, founder of Vela Gear Systems, which plans to build a gearbox factory in Marion but so far lacks financing.

Before investors will sink money into Davis's company, they want to make sure he has orders for his products. Developers won't provide them until they have the assurance of long-term tax credits, he said.

"If I don't get an order, I'm not going to get the money. It's the same for everybody in this business," Davis said.

Laura Ann Arnold, president of renewable energy promoter Indiana Distributed Energy Advocates, said the one-year extension was "extremely important" but the industry was hoping for more.

"A one-year-extension is really a Band-Aid. You can't take a major industry and do this stop-start, stop-start thing. It's like yo-yo dieting," Arnold said.

A multi-year tax credit, even one that's eventually eliminated, would better provide the stability needed to grow the industry and create jobs. Northwestern Indiana's steel industry, for example, stands to benefit if a blade manufacturer opened a factory in or near this state. Netherlands-based Global Blade Technology has announced plans to produce its first U.S. blades in Evansville by 2014.

"I think a gradual phase-out over a longer period of time would have been better," Arnold said.

Stutzman, who represents northeastern Indiana, was among 47 U.S. House members who signed a letter to Speaker John Boehner in September criticizing the tax credit. They said a one-year extension would cost taxpayers more than $12 billion. Stutzman was the only Indiana representative to sign the letter.

"It often drives wind developers to build projects with little regard to consumer demand, as long as they can be placed on line and their power brought to market to collect the subsidy," the letter said.

Critics say if wind power was a viable industry it wouldn't need to be so heavily subsidized by taxpayers. They also point to studies that find jobs generated by the industry cost taxpayers many times more than jobs in traditional energy industries.