Investors Lobby Congress to Extend Wind Production Tax Credit

Two dozen investors representing over $800 billion in assets under management sent a letter to Congressional leaders today calling for an immediate extension of the Production Tax Credit (PTC) for wind, set to expire on December 31, 2012.

Enacted by the Energy Policy Act of 1992 and signed by President George H.W. Bush, the PTC was created to stimulate investment in wind energy, closed-loop biomass, and poultry-waste energy resources. Under the American Jobs Creation Act of 2004, the PTC was extended to include geothermal energy, open-loop biomass, solar energy, small irrigation power, landfill gas and municipal solid waste combustion.

Wind power, which receives a tax credit of 2.2¢ per kilowatt-hour, is the only resource type set to expire this year. The group of investors argues that the PTC strengthens and stabilizes the wind power market, making the renewable energy technology more attractive to investors.

“We have long-term positions in a variety of suppliers and diversified firms that can link a portion of their success to the wind power industry," said Matthew Patsky, CEO of Trillium Asset Management, an independent firm devoted exclusively to sustainable and responsible investing. "We want to see that progress continue without being bogged down by uncertainty in Washington."

Trillium is one of 12 asset management firms that signed the letter. Signatories also included seven state treasurers, controllers, and pension funds, as well as four investment advisors and religious investors.

The investors noted that when Congress has allowed the PTC to expire, as it did in 1991, 2001, and 2003, wind installations dropped between 73 and 93 percent in the following year. "Such short-term and inconsistent policy makes this promising sector more difficult to invest in," said the letter.

Uncertainty surrounding the PTC's extension has already caused problems for the sector. Vestas Wind Systems (OMX:VWS), the largest wind turbine manufacturer in the world, has cut its workforce in the U.S. and Canada by about 20 percent this year due to uncertainty surrounding the PTC extension. In February, the company said it would fire 1,600 workers in Colorado unless the PTC is renewed.

“Vestas U.S factories are filling export orders for customers in Canada, Mexico, and Central and South America,” said Martha Wyrsch, President of Vestas-American Wind Technology. “However, the U.S. wind industry has slowed, largely due to the uncertainty surrounding the federal Production Tax Credit extension at the end of 2012.”

Similarly, Spanish turbine manufacturer Gamesa (BMAD:GAM) announced furloughs of 165 workers at its Pennsylvania factory pending extension of the PTC.

Still, the PTC is not without its detractors. In September, 47 House Republicans sent a letter to Speaker John A. Boehner (R-OH) encouraging the expiration of the PTC.

"The Obama administration has poured billions into subsidizing its favored green energy sources," said the letter. "Twenty years of subsidizing wind is more than enough."

A recent study commissioned by Exelon (NYSE:EXC), the country's largest producer of nuclear power, found that the PTC is inefficient and wasteful, and that the wind energy industry should be able to function without market-distorting subsidies.

Exelon, which produces a small amount of energy through wind power, was expelled from the American Wind Energy Association (AWEA), the industry's trade association in the U.S., for lobbying Congress to allow the PTC expire. According to the AWEA, the PTC has encouraged $20 billion in private investment and has helped create 75,000 jobs.

“Instead of threatening tens of thousands of wind power jobs, Congress should heed these investors’ call and craft long-term policy that supports renewable energy and its workforce,” said Mindy Lubber, director of the Investor Network on Climate Risk.

One of those investors is Oregon State Treasurer Ted Wheeler, who oversees the management of $72.5 billion of state funds. Oregon, home to the North American headquarters of Vestas and Iberdrola Renewables, currently generates enough wind energy to power 700,000 homes.

“The Production Tax Credit is vital to fostering a vibrant renewable power sector, which will improve our economic competitiveness while also reducing our reliance on fossil fuels,” said Wheeler. “Renewable energy generation opportunities beckon from border-to-border in Oregon, and they promise to produce not only clean and sustainable power but also crucial employment and investments in key infrastructure.”

The group of investors is scheduled to meet with Congressional staff tomorrow to discuss their support for the tax credit.

Image credit: Lews Castle UHI