GE Energy Financial Services, a unit of GE (NYSE: GE), released a study estimating that a federal tax incentive set to expire Dec. 31 for wind energy projects more than pays for itself through tax revenues from the projects’ income, vendors’ profits and individual workers’ wages.
This is significant in that U.S. Congressional Democrats have failed five times to pass extensions to tax incentives for wind, solar and other renewable energies, because they insist on paying for the incentives by reducing spending in other areas.
First they tried to reduce tax incentives for oiland natural gas companies, and then they tried to close a tax loophole for hedge fund managers. Congressional Republicans objected to both measures and blocked the incentive extensions.
The GE study estimates that wind farms built in 2007, supported by the production tax credit, carry a net present value benefit to the US Treasury of $250 million.
"Congress is debating how to pay for the wind tax credits perhaps without realizing that, over time, wind farms pump more money into the US Treasury and state and local coffers than they take out," Kevin Walsh, Managing Director of renewable energy at GE Energy Financial Services, said. "Our study shows that the wind farms more than pay for themselves through existing tax revenues, so it’s time to renew the incentives immediately."
The production tax credit for wind–as well as similar incentives for solar and other renewable energy sources – has expired three times in the past nine years, each time causing a 76-90% drop in installed capacity from the previous year.
"Too often, politics, rather than economics, has shaped the debate about extending the production tax credit," said Michael Eckhart, President of the American Council on Renewable Energy. "GE’s new study identifying additional economic benefits of the wind industry should bring all parties together, all supporting a proposition that is good for the environment, good for the economy, and even good for the federal treasury."
According to the study by GE Energy Financial Services, wind projects that went into operation last year generate federal income tax revenues from the projects, individual workers’ wages, vendors’ profits, and land leases. And they also provide federal tax revenue after 10 years, when the production tax credits expire.
In addition to those federal tax revenues, the wind projects generate an estimated $6 million per year in local property taxes, $15 million annually in state income taxes on wages and profits during construction and $1.5 million per year in taxes while operating.
"Congress’ repeated failure to act could derail the wind energy industry at the worst possible time for the economy, placing 76,000 wind jobs and more than $11.5 billion in investment at risk," said Randall Swisher, Executive Director of the American Wind Energy Association.
Congress Daily reported that Senate Democrats and Republicans are working on a compromise to extend the long-awaited incentives.
Republicans are saying that only new tax provisions should require offsets under the Democrats "pay-as-you-go" philosophy, not extensions of existing credits. If Democrats bite on this compromise, it could mean smoother sailing for the tax incentives.
However House Democrats are holding firm on the notion that the entire tax package be offset.
"I don’t know how many times I have to say it, but let me repeat for my Republican colleagues in the Senate: This legislation will not be considered in the House unless its costs are offset," House Majority Leader Hoyer said in a statement.
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