WASHINGTON (Reuters) - Wind energy companies should focus on ensuring that the tax credit at the center of their industry survives at all in coming months, and not so much on trying to beef it up next year, said a senior U.S. Republican senator on Wednesday.
“The issue right now is the existence of the tax credit,” Charles Grassley told reporters after speaking at an industry event. “We’ve got to worry about that first and foremost.”
The tax credit for new turbine projects expires at the end of the year. Its fate is uncertain amid the negotiations between lawmakers and President Barack Obama to avert the “fiscal cliff,” a series of tax increases and spending cuts due to kick in next year.
Grassley has backed the credit, known as the renewable energy production tax credit, since it was established in 1992. It also is available for other kinds of renewable energy, including geothermal, solar, hydropower, biomass and tidal.
Grassley voted in August for a bill to help wind companies by letting them take the credit at the start of construction, rather than when new turbines are finished and connected to the energy grid. The bill won approval in the Senate Finance Committee, but it has not come up for a full Senate vote.
Lobbyists, analysts and congressional aides said they doubted the bill - which would greatly increase the cost of the credit to taxpayers - could pass either the Senate or the House of Representatives.
A lobbying fight has emerged over renewing the credit at its present level, pitting backers such as NextEra Energy Inc, the largest U.S. wind energy producer, against rivals such as Exelon Corp, the top U.S. nuclear power group.
Equal to 2.2 cents on each kilowatt-hour produced, the credit poses a competitive threat to utilities like Exelon that rely chiefly on traditional power generation, analysts said.
Exelon generates wind power and has claimed the credit, too, but NextEra owns many prime U.S. wind facilities, analysts said.
Wind advocates said they need the more favorable tax credit in 2013. If the credit is extended at its present level, “we don’t see many wind projects being developed in 2013,” said NextEra Executive Chairman Lewis Hay in an interview.
Hay declined to comment specifically on the company’s expansion plans if the credit is extended or not. The company claimed about $147 million of wind tax credits through the first nine months of 2012, according to regulatory filings.
A one-year extension of the current credit is “unlikely to spur a lot of wind development in 2013,” said Matthew Kaplan, wind energy analyst at IHS Inc, an economic research firm.
Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Phil Berlowitz