How the end of a major tax incentive may impact wind energy

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• Hari Screenivasan:

  The U.S. currently has no national plan to combat climate change. Several states however have clean energy mandates offering technology specific grants and tax credits to help renewable energy producers compete with fossil fuels. And it appears to be working. Since the year 2000, the amount of renewable energy on our grid from sources like solar and wind has more than doubled. But after this year a tax credit supporting wind energy for nearly 30 years is phasing out. NewsHour Weekend Special Correspondent Karla Murthy reports on how the industry is coping with the end of the incentive.

• Karla Murthy:

  Off a rural county road in West Texas, several dozen local landowners and guests are gathered around three 200-foot long wind blades. Using special acid-free markers, attendees sign the fiberglass and balsa wood blades, ceremonially kicking off what will be one of the largest wind farms in Texas: Aviator Wind.

  Hollis Farris is one of those landowners. He owns a 5,000 acre ranch used for raising cattle and game hunts.

• Hollis Farris:

  Well I've always enjoyed the wind where my house sits. I get wind coming from this direction, in that direction. I didn't think it'd ever make me any money.

• Karla Murthy:

  Eight of the 191 turbines that make up the Aviator Wind project will be on Farris's property. Together, landowners negotiated how much they would earn when the turbines spin. Apex Clean Energy, which is developing the project, estimates Aviator will generate about $172 million for the 80 participating landowners.

  Farris didn't want to disclose exactly how much he expects to make, but with his eight turbines, he could easily earn six figures a year.

• Hollis Farris:

  The way I see it, you have a bad year, this gives you an income to keep the ranch running.

• Karla Murthy:

  When Aviator Wind is completed, it will produce 525 megawatts of energy each year, enough to power about 185,000 homes.

  Mark Goodwin is the CEO of Apex Clean Energy.

• Mark Goodwin:

  An older project from 10 years ago would have two or three times as many turbines and the cost of the electricity has come down significantly in the last 10 years.

• Karla Murthy:

  So way more productive?

• Mark Goodwin:

  It is way more productive and the cost has essentially stayed the same or gone down.

• Karla Murthy:

  The turbine blades being installed at Aviator are nearly 60 percent bigger than ones on turbines installed less than a decade ago. This helps each turbine generate more electricity, in turn driving down the price of the power it captures.

  Wind power in the United States has also gotten a big boost from a federal subsidy called the production tax credit, or PTC. First passed in 1992 as part of the bipartisan Energy Policy Act, it's one of several incentives to support renewable energy technologies in the United States. The PTC provides a subsidy to wind energy producers for each kilowatt of energy generated for the first decade of a project's operation. While the credit was originally scheduled to end in 1999, it has been extended by Congress 12 times since then.

• Melissa Lott:

  The idea with the PTC was to say, 'OK, we've got these technologies that don't seem to be developing as fast as we want them to. So lets put an incentive there.'

• Karla Murthy:

  Melissa Lott is a Senior Research Scholar at Columbia University's Center on Global Energy Policy.

• Melissa Lott:

  So if you look back at 1992 and you look at onshore wind, we had somewhere around 1.5 gigawatts of wind. And if you look at it today, fast forward, we're talking and having over 100 gigawatts of wind power in the country and it's producing seven percent of the electricity in this country at this time. Since 2011, we've seen the amount of wind on the system double. That's incredible growth.

• Karla Murthy:

  At the same time, the PTC has also helped push down the wholesale cost of wind energy by about 70 percent in the last decade.

• Melissa Lott:

  Onshore wind looks like it's competitive in a significant number of states in the U.S. So if the idea behind the PTC was to say, 'OK, we're going to help a technology that's not quite there,' well in the case of wind, maybe it is there now?

• Karla Murthy:

  And that's exactly what lawmakers have determined. After nearly 30 years, Congress is phasing out the PTC. Wind projects need to be operational by the end of 2020 to receive the full credit, with the incentive completely disappearing by 2024.That means projects like Aviator are racing to be up and spinning this year.

  A turbine can be built in as fast as two and a half weeks. And to build nearly two hundred of them by the end of this year requires carefully choreographing the location of equipment like cranes; and a small army of construction workers. While some teams are preparing sites, others are receiving and staging the massive pieces of infrastructure that make up each turbine. Getting the sections of each one here is also a logistical feat.

  The blades are shipped on expandable trailers and are so long that access roads built for the project can't be too steep, or the blades could scrape the ground. Beyond the scale and increased productivity of wind projects like Aviator, renewable energy has also gotten a boost from big corporations hoping to address climate change by offsetting their greenhouse gas emissions.

  Among those signing the blades at aviator was a team from Facebook, which has pledged to buy about 40 percent of the energy produced here. Urvi Parekh is the head of renewable energy for Facebook.

• Urvi Parekh:

  We've set a goal that in 2020, Facebook, 100 percent of its operations will be supported by renewable energy projects. And our interest is in making sure those renewable energy projects are in the same region or electrical grid where our consumption happens.

• Karla Murthy:

  The power Facebook is buying from Aviator will offset energy used by its data centers in nearby Fort Worth and New Mexico. In the last seven years, Facebook has already bought enough renewable energy to power about 75 percent of its operations.

• Karla Murthy:

  Does it make economic sense to be purchasing power here from The Aviator Wind project?

• Urvi Parekh:

  You know, we look at the amount of money it takes to run an entire data center and the renewable energy piece is always built in for us. And it's not that many years ago when people believe that renewable energy was too expensive to use. And it's been impressive with technological advances to see the costs of renewable energy coming down.

• Karla Murthy:

  The other major customer of Aviator Wind is McDonald's, which is also contracting to buy about 40 percent of the annual energy production here. It's the fast food giant's first large renewable energy purchase. So you have some big companies that have agreed to buy a significant chunk of energy from your project. I mean, how important are those kinds of agreements to creating a market for big wind projects?

• Mark Goodwin:

  It's critical and it is a terrific evolution of our industry where there are a lot of corporations like McDonald's and Facebook, who understand that one of the best ways for them to mitigate their carbon emissions is for them to procure electricity from wind farms like Aviator.

• Karla Murthy:

  Goodwin says these corporate commitments to combat climate change, in turn end up supporting the rural communities where projects like Aviator are based.

  So this whole facility is brand new?

• Aaron Hood:

  All of it is brand new.

• Karla Murthy:

  Aaron Hood is the superintendent of the Robert Lee Independent School District, which is located in the same county as Aviator Wind. Hood says that with just about 285 students, the district historically relied on taxes paid by oil and gas operations. More recently though, it's been taxes paid by wind projects.

• Aaron Hood:

  We're proud of it. Schools our size usually don't get opportunities to do this…

• Karla Murthy:

  Yeah.

• Aaron Hood:

  So we were very fortunate.

• Karla Murthy:

  Aviator is the third wind development to benefit the district and it's expected to provide about 34 million dollars in tax revenue over the next 25 years.

  Did you ever think wind would play such an important part in running your district?

• Aaron Hood:

  I did not. I don't think anybody here ever, ever even thought about that. And so I think it's been, you know, a blessing to us. I think it gives us the school, the facility that we have. And it's good for our kids.

• Karla Murthy:

  But with the PTC phasing out, analysts expect there to be a drop off in wind installations over the next several years. And although producers have known about this phase-out since 2015, some in the wind industry are worried.

• Mark Goodwin:

  It could be problematic if there is no carbon policy put in place.

• Karla Murthy:

  Apex CEO, Mark Goodwin, says there was a belief that a larger plan to tackle climate change was coming.

• Mark Goodwin:

  The wind industry voluntarily agreed to a phase-out. But that was in a scenario where over that phase-out, we expected there to be a carbon policy that ramped up. Wind and solar generate no greenhouse gases. Fossil fuel generators, they pollute for free. And there should be a price on that. And that will help balance out where where we go in the future.

• Karla Murthy:

  There have been several proposals to curb greenhouse gas emissions dating back decades, including carbon taxes, cap and trade systems, and more recently a Green New Deal that would mandate renewable energy on the grid. But the US is far from passing any kind of national carbon policy to prevent climate change.

  In fact, in 2017 the Trump administration it was pulling the United States out of the Paris climate accords.

• Melissa Lott:

  This is in the absence of any carbon policy…

• Karla Murthy:

  Energy researcher Melissa Lott says relying on incentives for specific technologies, like the production tax credit for wind, is not the most efficient way to reduce greenhouse gas emissions.

• Melissa Lott:

  The best thing we can do is to have a policy that stays technology neutral and says our goal is zero carbon. Given that goal, here's a structure in which for you all to operate and then let the markets decide what happens after that.

• Karla Murthy:

  So, but without that federal policy, should we continue having these tax credits?

• Melissa Lott:

  Yeah, so there are arguments both ways. But I think if we don't have a national policy that supports climate holistically, we should be doing whatever we can and if the means before us is a production tax credit, then fine.

• Karla Murthy:

  As the wind industry enters the last year of the full PTC, 2020 is projected to be a record year. With developers expected to install nearly 40 percent more wind energy than last year.