The federal Product Tax Credit is set to expire at the end of the year, but unlike last year when wind industry officials lobbied Congress to approve an extension, most companies are watching passively as the deadline approaches.
Congress extended the tax credit of 2.2 cents per kilowatt hour of renewable power for a year as part of the fiscal cliff deal in January.
A tweak lawmakers made means wind farm operators qualify for the credit if their projects are started this year. The tax credit extends for 10 years from a farm’s completion.
Wind industry manufacturers saw production lag and numerous layoffs in 2012 because of the delay in approval of the extension. Companies that build turbines, blades and other parts for the industry had asked for the credit to be extended because it takes 18-24 months to develop a wind farm.
As a result of the change, business picked up again, industry members said.
“As we warned, the industry experienced a slow-down last year associated with the expiration of the [tax-credit],” said Rob Gramlich, senior vice president of public policy for the American Wind Energy Association, in an emailed statement.
“Since the [tax-credit]was extended, business has picked up, many employees have been re-hired, and utilities are signing long-term contracts for wind energy,” Gramlich said in the statement. “So once again, we have strong market evidence that wind tax credits work as intended to drive local and rural economies.”
LM Wind Power, one of the industry’s leading wind turbine blade manufacturers, announced in October that the company planned to hire more employees at its Little Rock plant this year.
The Denmark-based company said it expects to have more than 400 people working at the plant by the end of the year.
The announcement came a year after LM Wind Power cut more than half of its Little Rock workforce because of the uncertainty surrounding the tax credit.
In August 2012, the company employed about 300 full-time employees and 140 temporary workers. About 80 hourly employees and 14 salaried employees were laid off, and all of the temporary positions were cut.
A spokesman for LM Wind Power could not be reached Thursday, but the company previously said the new jobs were part of more than 850 jobs it was adding nationwide to handle the increase in orders it received after the tax credit was ex-tended.
“The way this was extended, so that wind projects that are underway will still qualify, probably means orders for equipment will still be filled through 2015,” said Steve Patterson, executive director of the Arkansas Advanced Energy Association. “There’s been a big rush of projects launched in the last quarter of the year.”
While industry members say the modification to the tax credit provides a one- to two-year cushion for manufacturers waiting for another extension, some companies have already been hurt by the unpredictability of the credit.
Earlier this year, Nordex USA Inc. said it would stop production at its wind turbine facility in Jonesboro and lay off about 40 employees.
Nordex USA is moving production operations to Germany, home of parent company Nordex SE, said Naomi Lovinger, spokesman for the company.
“There was one wind turbine of 1.6 [megawatts] connected to the grid in the first quarter of 2013 and none in the second quarter,” Dan McDevitt, Nordex USA’s president and chief executive officer, said in a statement. “As you can imagine,this had a devastating effect on manufacturers like Nordex and companies in the supply chain. It’s virtually impossible to plan production and train and retain highly skilled employees with this uncertainty in the market.”
McDevitt said uncertainty about the tax credit means the industry is “facing the same market challenges and instability regarding future orders and timing.”
Gramlich said Congress needs to address the credit.
“This can’t drag out for too long or else disruptions will occur again,” he said in a statement.
Congress has been slow to pass any type of bill, notjust to renew the tax credit, Patterson said.
“There are efforts underway, but Congress is sort of a black hole for policy right now,” he said.
U.S. Rep. Tim Griffin, RArk., said another extension would not be approved by Congress by the end of 2013, but it could be something lawmakers address as part of a broad approach to tax reform next year.
Griffin said he supports an extension for another year or two.
“Long term, we do need to phase this out,” he said. “The question is of when. Whether it’s one more year or two more years, but I can tell you I don’t believe anything will be done this year because the whole point of tax reform is to address all of this stuff in a comprehensive way.”
Business, Pages 29 on 12/13/2013