Wednesday, September 22, 2004

A Little History on The Vermont Wind Industry, and Some Lessons on the Production Tax Credit Too

The Rutland Herald has this report on the a presentation given by David Blittersdorf, founder and president of NRG Systems, at the Castleton, Vermont Historical Society last week. According to the report, Mr. Blittersdorf, one of the pioneers of the wind industry in Vermont and New England, shared an interesting account of the first wind energy venture in Vermont. The single turbine project was operated in Castleton by the Smith-Putterman company between 1939 and 1945. The experiment apparently came to an end after the turbine blade fell off.

In addition to this local history lesson, Mr. Blittersdorf also made several important points on US tax subsidies for wind power production - or the current lack thereof. As discussed in detail in our previous post on the Production Tax Credit (PTC) issue, the wind industry in the U.S. is currently "on hold" waiting for Congress to reenact the 1.8 cent per kilowatt hour federal tax credit. This small tax credit can mean "go, no go" for many wind power projects, but its important to recognize just how minor the subsidy is in the grand scheme of federal energy subsidies.

According to reports in 2002, the total estimated value of tax credits received by wind developers under the PTC between 1992 and 2002 was approximately $55 million. In contrast, a report published by the Energy Information Administration (a component of the U.S. Department of Energy) indicates that the federal government handed out over $2.8 billion to the oil, gas, coal, and nuclear industries - during 1999 alone. The wind industry is, as Blittersdorf put it, practically unsubsidized when compared to other energy sources.

Nevertheless, for a small industry even this minor subsidy plays an important part. And when it comes to the impact of an "on-again-off-again" approach to federal production tax incentives, the history of this young industry teaches some important lessons. While the U.S. was once a leader in wind development, according to Blittersdorf a lapse in similar federal subsidies in the 1980's drove nearly 3/4 of U.S. wind power companies out of business. That means the majority of benefits associated with this now $10 billon per year global industry are turning the economic turbines of other countries' economies.

While wind energy is nearing competitive pricing levels even without the PTC, now is not the time to end federal support for this rapidly expanding industry - the US energy portfolio can't afford a future that doesn't include a robost wind power sector.

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