Tax-credit doubt leaves wind industry up in air

Workers load a wind turbine blade onto a rail car at the port in Corpus Christie, Texas, last month. Work on some U.S. wind industry projects has stalled as investors wait to see whether a federal tax credit for wind power is extended.
Workers load a wind turbine blade onto a rail car at the port in Corpus Christie, Texas, last month. Work on some U.S. wind industry projects has stalled as investors wait to see whether a federal tax credit for wind power is extended.

— For most employees at LM Wind Power’s Little Rock plant, this is their last month on the job.

In August, the Denmarkbased company, announced it would lay off more than half its work force in the city, and by the end of October those workers will be gone.

Similar wind-industry cutbacks are happening throughout the United States because of the looming Dec. 31 expiration of the federal Production Tax Credit that makes wind power a more competitive energy source.

The tax break is a credit of 2.2 cents per kilowatt-hour of renewable power generated and its potential expiration has companies wary of investing in the wind industry.

Many orders for windturbine blades by LM Wind Power’s customers are on hold or have been canceled as the industry awaits the fate of the tax credit, said Adam Ruple, the company’s human-resources director.

“Everyone is waiting to see what’s going to happen,” he said.

There are predictions that wind-industry development might drop about 70 percent next year, Ruple said.

“It’s probably the single most important thing for our industry,” he said “It’s kind of the life and breath of the industry.”

Nordex USA Inc., a wind-turbine manufacturing company, has avoided layoffs at its Jonesboro plant, said Ralf Sigrist, president and chief executive officer.

But, he said, more layoffs will come in the wind industry if the tax credit is not extended.

“We try to avoid that, that’s why we try to diversity in other markets, but it is certainly difficult,” Sigrist said. “I am hopeful to avoid it, but I cannot be sure at the moment.”

He said it is difficult for companies to move forward with orders not knowing if they will see a tax break next year.

“The main problem is the uncertainty,” Sigrist said. “To say that we don’t see any problem or any risk to the market decline ... that would not be true.”

At least 3,000 jobs have been lost because the wind tax credit has not been renewed, and if it is not extended, about 37,000 of the 75,000 wind-energy jobs in the U.S. will be at risk, said Elizabeth Salerno, director of industry data and analysis for the American Wind Energy Association.

“These would be immediate job losses that would hit us in early 2013,” Salerno said. “It’s already hitting us.”

The wind-power tax credit has drawn bipartisan support, but the issue separates the presidential candidates.

Republican presidential nominee Mitt Romney has said he opposes the tax credit, while President Barack Obama has supported renewable-energy manufacturers, including those in the wind industry.

U.S. Rep. Tim Griffin, R-Ark., who supports a temporary extension, said there is some opposition to the production tax credit.

“There’s people on both sides of these issues, like a lot of issues,” Griffin said. “There’s probably sufficient support to move forward in the House, but I don’t know where the Senate is.”

Sens. Mark Pryor, a Democrat, and Republican John Boozman said they support the renewal of the tax credit. Other members of Arkansas’ congressional delegation have said they also support an extension.

“Wind power plays an integral role in electric generation in our country, and Arkansas is well-positioned to take the lead in this growing industry,” Pryor said in a statement supporting the extension of the tax credit.

“There’s good bipartisan support for the wind industry,” Boozman said. “If we use all the things we have been blessed with, we have the opportunity to be energy independent in the next few years.”

He said he wished a decision had been made on the tax earlier in the year because it “freezes businesses.”

The Arkansas Advanced Energy Association has pushed for the tax credit to last just a few more years to help stabilize the industry, said Steve Patterson, executive director of the Arkansas Advanced Energy Association.

“It doesn’t have much longer to go until the wind industry doesn’t, frankly, even need it,” he said.

The wind industry can survive without the tax break but would have more difficulty attracting investors, Patterson said.

“Yes, the industry could be competitive without it,” he said. “But not as competitive and definitely not as attractive an investment.”

While the future of the wind industry in the U.S. is uncertain, it is a growing market it China and other countries, and companies are beginning to look elsewhere for business.

“We began work a number of years ago in expanding our marketing activities to look at potential export markets,” Sigrist, from Nordex said. “So we are looking at businesses to be able to at least provide — to help fill in some of what we were anticipating from the U.S. market until the U.S. market gets on more of a stable footing.”

Ruple said LM Wind Power plans to expand manufacturing operations in Brazil — a move he says is not directly linked to the tax credit.

“We are a global supplier, and there are markets around the world that do better,” he said.

Business, Pages 31 on 10/06/2012. Note: A correction has been appended to this story since its original publication.

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