• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Opportunity Missed with Energy Bill

Posted on: Tuesday, 4 October 2005, 12:00 CDT

By ROSALIE RAYBURN Journal Staff Writer

New Mexico's abundantly sunny skies and reliable winds make it one of the potentially richest states in the nation for renewable energy.

But industry experts say the federal energy bill signed into law this summer missed some major opportunities to boost renewables in New Mexico and the rest of the country, especially in these days of soaring oil and natural gas prices.

Scientists at the National Renewable Energy Laboratory in Boulder, Colo., have ranked New Mexico second in the nation for solar energy potential and 12th in potential for wind energy.

Developing that potential could translate into more jobs and higher income for New Mexico, especially in wind-rich but job-poor parts of the state, say renewable energy developers like Walter Hornaday, whose Austin-based Cielo Wind Power built the Caprock Wind ranch near Tucumcari this year.

Wind and solar energy experts credit New Mexico's governor, legislators and state regulators for enacting a renewable portfolio standard that requires utilities to derive 5 percent of their power from renewables beginning in 2006, rising to 10 percent in 2011.

To boost development

New Mexico is one of 18 states that have such standards. And studies by groups that include Cambridge Energy Research Associations have shown that more renewable-energy facilities have been installed in states that have such standards.

Federal lawmakers should have taken the hint as well.

"What manufacturers and investors in renewable energy technologies are looking for in energy policy is a long-term (national) commitment to growing clean energy supplies in an orderly manner," said Ed Smeloff, senior manager for project development for the Solar Systems Division of Sharp Electronics Corporation.

And that's where the energy bill fell short, said Randall Swisher, executive director of the American Wind Energy Association, a trade group based in Washington, D.C.

The bill contained $14.5 billion in tax incentives for the energy industry, including tax credits for wind energy producers and residential solar systems. But an amendment proposed by Sen. Jeff Bingaman, D-N.M., that would have required utilities nationwide to derive 2.5 percent of their energy from renewable sources beginning in 2008, rising to 10 percent by 2020, was dropped at the 11th hour.

Federal resistance

Bingaman's proposed national renewable portfolio standard won Senate support but ran into opposition from the House.

"It's my view that the current House would never support such a mandate," said Sen. Pete Domenici, R-N.M., who chaired the Senate energy committee. "I think the opposition was with the mandate as a way of doing it."

The Bush administration also opposed the amendment.

"The administration believes a national (renewable portfolio standard) would drive up energy costs, and be unfair for states that lack renewable resources," said David Garman, assistant secretary of energy efficiency and renewable energy, in a statement on the Department of Energy's Web site.

The amendment also was a nonstarter with pro-free-market groups such as the Competitive Enterprise Institute, a nonprofit public policy group.

"It really isn't a matter for the federal government to decide policy for utilities," said Myron Ebell, the institute's director of global warming policy.

'Opportunity missed'

The failed amendment was "an opportunity missed for the country," Bingaman said in a telephone interview just before the president signed the energy bill in Albuquerque.

If it had passed, the amendment would have created a better longterm climate for investment, research and technology development of alternative energy than exists at present, Swisher said.

The energy bill did extend a 1.9 cent per kilowatt-hour tax credit for wind energy producers through 2007. The tax credit was due to expire in December.

And those tax credits do help attract investors.

Agricultural equipment manufacturer John Deere and Goldman Sachs, a New York investment banking and securities firm, have purchased wind farms in Texas. And in New Mexico, global investment firm Babcock & Brown now owns the Caprock Wind Ranch near Tucumcari.

Those wind facilities provide a much needed financial boost to rural communities hurt by drought and low farm prices. FPL Energy, which owns the wind ranch that supplies PNM, pays landowners between $2,000 and $4,000 per turbine annually to lease the land and about pays $450,000 in lieu of taxes to schools and local governments.

They also provide jobs. FPL requires about 12 windsmiths to monitor and do maintenance at its wind farm.

New Mexico's growing wind industry has prompted Mesalands Community College in Tucumcari to hope to become a national training center for the wind industry.

But Cielo's Hornaday said the existing incentive only goes so far. When tax credits expire, investor interest evaporates and jobs dry up, he said.

Cielo Wind Power had to delay construction of the Caprock project for nine months when Congress allowed the tax credit to lapse before extending it to the end of 2005. The energy bill prolonged that extension through 2007.

While any boost is welcome, short-term incentives tend to create a boom-and-bust cycle, which makes it tough to maintain a trained work force, order materials and plan production schedules, Hornaday said.

It has also hampered development of a domestic wind turbine manufacturing base. At present, General Electric is the only U.S. company among the top 10 companies that manufacture wind turbines for utilities, Swisher said.

Project canceled

In 2002, Danish company Vestas, an industry leader, announced plans to build a plant to make wind turbine blades, housings and towers in Portland, Ore. Vestas expected the plant would employ 1,000 people.

Vestas later canceled the project because of uncertainty over how long the tax credit would continue.

"The American market has created considerable instability for Vestas, mainly due to the (tax credit) scheme, which has at regular intervals expired and afterwards been extended again for a period of two or three years," said Hans Smith, executive management assistant for Vestas in Denmark, in an e-mail.

Smith said the latest extension of the tax credit gives stability in the short term, "but unfortunately, the suggested mandatory demand for renewable energy was not approved. Against this background, Vestas maintains its decision to suspend the plans for local production in the U.S.A."

"We are really losing a substantial part of the economic development part of this industry by not having a more far-sighted policy," he said.

Boom and bust for now

Continuing the policy of shortterm incentives will only perpetuate the boom-and-bust cycle, said Ben Luce, chairman of the Coalition for Clean Affordable Energy in New Mexico.

He said two years is too short to provide the certainty that investors need.

"Who would back a new business based on only two years of incentives?" he asked, in an e-mail.

Domenici believes the most acceptable approach may be to create long-term tax credits, possibly five to 10 years. This could be addressed in the next tax bill.

But at some point, the industry needs to become economically viable without the tax credit, he said.

Source: Albuquerque Journal

More News in this Category