Q&A on the Wind Energy Production Tax Credit

Q:    Why is there a production tax credit for wind energy?

A:    In 1992, the Energy Policy Act passed by Congress included an amendment I offered to establish a production tax credit for wind energy.  The idea was to try to level the playing field with coal-fired and nuclear electricity generation.  Both of those energy sources benefit from federal support.  What’s more, as much energy as possible – both traditional and renewable – should be produced at home to create jobs and strengthen national security.  Wind energy is a free resource, and it’s abundant in many places around the country.  Wind is also a homegrown resource.  The electricity it generates is produced on local farms, for local customers, and often adds investment value to the community.  Nationally, the wind energy industry supports 75,000 jobs.  Iowa ranks second among every state for wind production, and it means 6,000 good jobs for us.  In addition, a clean renewable source like wind is not dependent on far-away countries with leaders who are hostile to the United States even as they take our energy dollars.

Q:    How does the production tax credit for wind work?

A:    Producers are eligible for a tax credit for each kilowatt-hour of electricity produced by a qualified project during the first 10 years of operations.  Right now, the tax credit is 2.2 cents per kilowatt-hour.  It’s important to understand that this tax credit is available only when wind energy is produced.  There’s no benefit for simply placing the turbine in the ground.  So it is tax relief that rewards results, and that’s much different than failed taxpayer-funded grants and loans made since 2009 for other kinds of renewable energy development like electric car batteries.  

Q:    Why is the tax credit in jeopardy?

A:    This incentive for wind energy is set to expire at the end of the year.  The uncertainty about its extension has put jobs at risk.  Hundreds of Iowans employed in the wind industry have already been laid off because of slowing demand over uncertainty of the tax credit.  In August, the Senate Finance Committee, with a bipartisan vote, passed my legislation for a year-long extension.  In the House of Representatives, there are 119 cosponsors – Republicans and Democrats, including every member of Iowa’s delegation – of a bill to extend the tax incentive for wind energy.  An extension deserves a place in any year-end agreement to extend expiring tax provisions.  If Congress lets the production tax credit expire on December 31, wind energy would be the only form of energy generation without any federal incentive.  Oil and gas and nuclear all receive longstanding federal support.  Any changes should be made in a broad-based tax reform effort that considers tax incentives across-the-board in an intellectually honest way.  It doesn’t make sense to pit one domestic energy supply against another.  America needs all of the above – meaning drilling for domestic oil and gas, promoting renewable and alternative energy, supporting conservation, and emission-free nuclear energy – when it comes to energy.  That reality should dictate an even hand from policy makers.