THE WIND ENERGY DEBACLE: NO SUBSIDY, NO INDUSTRY

By Juan Montoya

In spite of the incompetence shown by Texas legislators – or perhaps because of it – the development of wind energy in the state has happened and caught communities in the Lone Star State woefully unprepared to reap its benefits.

Even though Texas is the leading state in wind energy generation, and seven of the largest wind farms are located here, local communities have not benefited from the bonanza.

The reason? At the heart of the industry's aim here in to the establishment of a self-sustaining energy sector, but rather the reaping of tax credits by large corporations that leave little, if any, residues for the local economy.

At the heart of the industry's survival is the congressional tax incentives – the Power Production Tax Credit (PTC) – which have gone through a boom and bust on-again, off-again cycles of funding.

The tax incentive for wind power expired last year, and the debate over its extension is now underway. Opponents say the wind power PTC is a wasteful boondoggle while supporters say it’s crucial for renewable energy and jobs. The Sierra Club calls it “one of the best bets we’ve made on clean, domestic energy.”

The limited funds available under PTC have stopped the development of wind energy projects short in many areas of the country.

Locally, a wind-energy project by Austin-based Baryonyx Corp.’s allowed a 19,794 acres lease about five miles offshore of South Padre Island to expire after the company was bypassed for a possible $47 million in U.S. Department of Energy grants in May.

The following month, the company stopped making its annual payments of $2.08 per acre, or $41,171.52, to Texas General Land Office in Austin.

A second lease held by the company of 21,672 acres a few miles farther north will expire Aug. 12 unless the company pays $45,077.76 by the expiration date.

An article in The Hill written by reporter Curtis Ellis says that "Congress created the PTC in 1992, a tax credit of roughly 2 cents per kilowatt-hour of wind electricity, to nurture the infant wind energy industry. Government incentives to promote crucial industries are time-honored. That’s not the problem with the PTC.

What’s important is that only big investors who want to offset tax liabilities on other investments need apply. The PTC can only be taken against 'passive income' - income from other investments. Private equity firms put together investors who need a tax write-off courtesy of the PTC. Warren Buffett admits he uses the PTC to lower his Berkshire taxes: 'we get a tax credit if we build a lot of wind farms. That's the only reason to build them.'"

Ellois goes on to write that the Institute for Local Self Reliance, a green energy cheerleader, says renewables work best “at small scales across the country,” what’s known as distributed generation, “a network of independently-owned and widely dispersed renewable energy generators” rather than “a 20th century grid dominated by large, centralized utilities.”

In fact the Institute explicitly says the PTC is a significant barrier to greater investment in renewable energy. Removing this barrier “makes smaller projects more accessible to the local community, and draws local investors back into the process,” says John Farrell of the Institute for Local Self-Reliance."

http://thehill.com/blogs/congress-blog/energy-environment/213183-wind-power-production-tax-credit-wall-st-wolf-in-green

Even given the haphazard economic picture of relying on wind energy to bolster the local economy, legislators in Texas have lagged far behind in creating a taxing scheme on the energy produced to benefit local communities instead of the large energy conglomerates.

Cameron County, for example, has no building codes for wind turbines and neither do other counties or the cities. The smattering of guidelines to control their construction or tax their production is virtually meaningless.

 Some pie-in-the-sky planners suggest that "additional wind projects in South Texas could be an economic catalyst for the region.

The so-called "Brownsville Strategic Infrastructure and Land Management Plan" for which the Brownsville Greater Incentives Corporation, the Port of Brownsville and the Public Utilities Board paid $452,000, weasel-words its way through endorsing more wind farms with the caveat that if tax credits are not renewed (as happened), "it would probably impact the industry's prospects for South Texas and elsewhere."

We once approached Cameron County Tax Assessor-Collector Tony Yzaguirre with a set of ordinances drafted by the State of Minnesota and local counties that had created a taxing scheme so that local communities, school districts and counties would get a share of the profits received from harnessing the wind and were told in so many words that local state legislators would never carry a bill that would tax industry.

So we are to endure the sight of those turbines dotting the South Texas countryside until the tax credits stop and then be left holding an empty wind bag and skeletons of rusting turbines.