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Indiana wind energy industry wants longer tax credit

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Officials with Indiana's wind energy industry say they are relieved by Congress' one-year extension of a tax credit but contend it will take a longer-term approach to grow the business and create jobs in the state.

The legislation signed earlier this week by President Barack Obama averting the fiscal cliff extended a wind energy production tax credit to projects that begin construction in 2013, but entrepreneur Noel Davis likened that to playing a single quarter of football instead of a complete game.

A project like the Wildcat Wind Farm going up in north central Indiana needs years to collect and analyze wind readings, perform economic studies, design a project, and secure land rights before starting to build.

"It takes a long time to do that," Davis said. "Something like that cannot be done in one year."

The law actually improves the extension to include projects that are started in 2013 rather than those that are completed, which the previous law required.

The uncertainty over long-term tax incentives has kept Indiana's wind energy industry from fully taking off despite the promise of projects such as Wildcat and the 303-turbine, 500-megawatt-capacity Meadow Lake Wind Farm in White County that have helped produce the 13th largest installed wind power capacity among states. As of Wednesday, Indiana had 930 turbines producing 1,543 megawatts of electricity, according to the Indiana Office of Energy Development.

The 2.2 cent-per-kilowatt tax credit was established in 1992, and some in Congress, including Rep. Marlin Stutzman, R-Ind., sought its elimination as a costly subsidy to an "intermittent resource."

Wildcat's developer, E-on Climate & Renewables, raced to finish its 125-turbine first phase in Tipton and Madison counties, about 40 miles north of Indianapolis, by the end of 2012 out of fear the credit wouldn't be renewed. Now that it has, it still needs to develop site plans and secure land rights for 200 more turbines in Howard and Grant counties, project manager Andy Melka said recently.

The uncertainty also has stalled job growth among manufacturers despite Indiana's manufacturing-heavy economy. Italy-based Brevini Wind announced plans in 2009 for a 450-worker factory in Muncie that would build turbine gearboxes, but it had only 70 workers by last year and has until the end this year to reach 250 jobs to receive $1.7 million in tax-increment financing revenue from Delaware County.

Brevini is among more than a dozen Indiana companies manufacturing wind energy components, but adding others will take more than one-year extensions of the federal tax credit, said Davis, founder of Vela Gear Systems, which plans to build a gearbox factory in Marion but so far lacks financing.

Before investors will sink money into Davis's company, they want to make sure he has orders for his products. Developers won't provide them until they have the assurance of long-term tax credits, he said.

"If I don't get an order, I'm not going to get the money. It's the same for everybody in this business," Davis said.

Laura Ann Arnold, president of renewable energy promoter Indiana Distributed Energy Advocates, said the one-year extension was "extremely important" but the industry was hoping for more.

"A one-year-extension is really a Band-Aid. You can't take a major industry and do this stop-start, stop-start thing. It's like yo-yo dieting," Arnold said.

A multi-year tax credit, even one that's eventually eliminated, would better provide the stability needed to grow the industry and create jobs. Northwestern Indiana's steel industry, for example, stands to benefit if a blade manufacturer opened a factory in or near this state. Netherlands-based Global Blade Technology has announced plans to produce its first U.S. blades in Evansville by 2014.

"I think a gradual phase-out over a longer period of time would have been better," Arnold said.

Stutzman, who represents northeastern Indiana, was among 47 U.S. House members who signed a letter to Speaker John Boehner in September criticizing the tax credit. They said a one-year extension would cost taxpayers more than $12 billion. Stutzman was the only Indiana representative to sign the letter.

"It often drives wind developers to build projects with little regard to consumer demand, as long as they can be placed on line and their power brought to market to collect the subsidy," the letter said.

Critics say if wind power was a viable industry it wouldn't need to be so heavily subsidized by taxpayers. They also point to studies that find jobs generated by the industry cost taxpayers many times more than jobs in traditional energy industries.

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  1. Aaron is my fav!

  2. Let's see... $25M construction cost, they get $7.5M back from federal taxpayers, they're exempt from business property tax and use tax so that's about $2.5M PER YEAR they don't have to pay, permitting fees are cut in half for such projects, IPL will give them $4K under an incentive program, and under IPL's VFIT they'll be selling the power to IPL at 20 cents / kwh, nearly triple what a gas plant gets, about $6M / year for the 150-acre combined farms, and all of which is passed on to IPL customers. No jobs will be created either other than an handful of installers for a few weeks. Now here's the fun part...the panels (from CHINA) only cost about $5M on Alibaba, so where's the rest of the $25M going? Are they marking up the price to drive up the federal rebate? Indy Airport Solar Partners II LLC is owned by local firms Johnson-Melloh Solutions and Telemon Corp. They'll gross $6M / year in triple-rate power revenue, get another $12M next year from taxpayers for this new farm, on top of the $12M they got from taxpayers this year for the first farm, and have only laid out about $10-12M in materials plus installation labor for both farms combined, and $500K / year in annual land lease for both farms (est.). Over 15 years, that's over $70M net profit on a $12M investment, all from our wallets. What a boondoggle. It's time to wise up and give Thorium Energy your serious consideration. See http://energyfromthorium.com to learn more.

  3. Markus, I don't think a $2 Billion dollar surplus qualifies as saying we are out of money. Privatization does work. The government should only do what private industry can't or won't. What is proven is that any time the government tries to do something it costs more, comes in late and usually is lower quality.

  4. Some of the licenses that were added during Daniels' administration, such as requiring waiter/waitresses to be licensed to serve alcohol, are simply a way to generate revenue. At $35/server every 3 years, the state is generating millions of dollars on the backs of people who really need/want to work.

  5. I always giggle when I read comments from people complaining that a market is "too saturated" with one thing or another. What does that even mean? If someone is able to open and sustain a new business, whether you think there is room enough for them or not, more power to them. Personally, I love visiting as many of the new local breweries as possible. You do realize that most of these establishments include a dining component and therefore are pretty similar to restaurants, right? When was the last time I heard someone say "You know, I think we have too many locally owned restaurants"? Um, never...

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