Sen. Alexander Proposes Windfall for Energy Research by Eliminating Wind Energy Tax Credit

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Publication date: 
4 August 2016
Number: 
94

Sen. Lamar Alexander has introduced a bill that, if enacted, would authorize a multibillion-dollar increase in energy research funding while eliminating the wind production tax credit. These provisions reflect the senator’s longstanding priorities in the development of new clean energy options.

Sen. Lamar AlexanderOn July 12, Sen. Lamar Alexander (R-TN), pictured right, introduced a short bill authorizing expansive new funding for Department of Energy Office of Science programs. The price would be killing the longstanding wind production tax credit (PTC), which has helped drive a major expansion in wind power in recent years.

Congress established the PTC in 1992 and has renewed it numerous times, most recently in December 2015 as part of the omnibus spending bill for fiscal year 2016. The credit is currently scheduled to expire on Dec. 31, 2019, with a gradual phase down each year until then. Alexander’s bill would eliminate the credit at the beginning of 2017 instead. He claims that doing so will free up $8.1 billion over the next ten years.

These savings would not entirely cover the expanded funding for the Office of Science called for in the bill. This year, the Obama Administration has requested $5.572 billion for the office for fiscal year 2017—a 4.1 percent increase on the year before. By contrast, Alexander’s bill would authorize $8.524 billion in fiscal year 2017, $8.936 billion in fiscal year 2018, and $9.377 billion in fiscal year 2019. These are impressive numbers, but they do come with caveats. It is not immediately clear how quickly DOE could actually expend such a large increase, nor is it certain that Congress would appropriate the full amounts. Alexander, though, does hold some sway over the latter issue as chairman of the appropriations subcommittee responsible for DOE.

Alexander has long record of supporting R&D, opposing PTC

Alexander’s bill puts into legislation an idea that he has been advocating since 2012. In a floor speech that year, he remarked that the price of gasoline and other fuels could be reduced by a doubling of energy research funding paid for by eliminating “wasteful, long-term subsidies that are exclusively or mostly for both Big Oil and Big Wind.” However, his interest in the individual components of the idea go back still further.

Alexander has been advocating for vast expansions in energy research since 2003, when, shortly after joining the Senate, he suggested raising Office of Science funding levels from $3.3 billion to more than $6 billion over five years. He has also continually championed the work of Oak Ridge National Laboratory, which is located in his home state of Tennessee and receives much of its funding from the Office of Science.

Alexander has been working against the PTC for almost as long. In 2004, the Tennessee Valley Authority began expanding its small wind farm at Buffalo Mountain, Tenn. In 2005, Alexander co-sponsored the “Environmentally Responsible Wind Power Act,” which, had it passed, would have denied tax credits to wind farms in or near designated natural landscapes. Since that time, landscape protection, particularly in the Appalachian Mountains, has been a consistent theme in his advocacy against the tax credit.

Alexander has also spoken against the PTC by highlighting wind’s limitations as a power source, as well as by describing it—including in the current bill—as a “mature technology.” The latter description derives from a response that Steven Chu, then Secretary of Energy, gave to Alexander at a 2011 hearing when specifically questioned about onshore wind energy’s maturity. However, Chu emphasized at that time that he was referring to its maturity from a research and development standpoint.

A chart from DOE’s Wind Vision report

DOE has specifically studied the economic maturity of wind technology. Since 2005, construction of new turbines has increased dramatically, due in part to wind’s increasing economic viability. However, a 2014 National Renewable Energy Laboratory report on the PTC and DOE’s 2015 “Wind Vision” report both note that collapses in new turbine construction linked to recent expirations of the PTC indicate the credit remains an important inducement. Studying a scenario without the PTC, the DOE report projects:

Minimal additional growth, up to 8% of total electricity demand, is observed by the mid-2020s. … Wind installations increase again in the late 2020s and return to levels more consistent with those prior to 2013 by the mid-2030s.

In this scenario, wind generation would cover about 25 percent of total electricity demand by 2050. With a more active policy, the report estimates wind turbines could generate 20 percent of domestic electricity by 2030 and 35 percent by 2050. Following the report’s release, Alexander expressed his objection to any such policy.

Alexander pursuing a tailored clean energy agenda

Alexander has been a consistent proponent of clean energy generally, his opposition to the wind tax credit notwithstanding. His new bill reflects his tailored vision. In his speech introducing the bill, Alexander emphasized his view that research is critical to the development of new clean energy sources:

Eight years ago, in a speech at Oak Ridge National Laboratory, I called for a project that would duplicate the urgency of the World War II Manhattan Project and put the United States on a path to clean energy innovation.

I proposed seven ‘grand challenges’:

  1. make plug-in electric vehicles commonplace;
  2. find a way to capture and use carbon;
  3. help solar become cost-competitive with other forms of energy;
  4. safely manage nuclear waste;
  5. encourage cellulosic biofuels to become cost-competitive with gasoline;
  6. make new buildings green buildings; and
  7. create energy from fusion.

In eight years, energy researchers have made tremendous progress in these areas. For example, the price of solar panels has fallen over 80 percent since 2008. But, on some of the other challenges, there is still a long way to go.

As far as existing technology is concerned, Alexander has strongly advocated expanding nuclear energy’s role in the nation’s energy mix, and has had a front-row view of recent developments in that sector. Oak Ridge is, notably, a center for nuclear energy research. Moreover, the only two new commercial nuclear reactors commissioned in the United States in the last twenty years have both been at the Watts Bar plant in Tennessee.

Wind power plants in the continental United States.

Wind energy, by contrast, is not a large component of the energy grid in Tennessee or anywhere else in the American South. In addition to opposing the PTC, Alexander has worked on the local level to keep turbines away. In May 2015, he urged the Tennessee Valley Authority to reduce the role of wind in its future plans. This May, Alexander announced his opposition to a new wind farm in Cumberland County, Tenn.

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