Congress made big headlines last month with the extension of payroll tax credits for American workers. After weeks of gridlock and a bit of political maneuvering, both the House and Senate finally adopted a key bill, which was promptly signed by President Obama. But overshadowed in all the hoopla was a separate dispute over taxes: in this case special breaks for the wind industry. Congress quietly rejected those tax breaks and in so doing, reinvigorated a difficult policy debate in the Lone Star State.
The tax breaks in question are known as production tax credits. The American Wind Energy Association has warned that without them wind developers will close plants and cancel billions of dollars in construction. At the same time, Texas is in the middle of a massive and expensive build out of transmission lines specifically intended to serve wind developers. Given the inaction by Congress and other factors, some now question whether the full build out continues to make sense.
“Forcing consumers to pay for extremely overbuilt transmission capacity would be very hard to justify,” state Rep. Rene Oliveira wrote in a recent memo to the chairwoman of the Public Utility Commission.
Although not referencing the loss of the production tax credits, Oliveira in his letter noted other evidence that the massive build out may not be needed. “Texans deserve an efficient and cost-effective system,” he wrote. “Overbuilding when warning signs exist is hardly prudent. … Given the dramatic slowdown in installed wind capacity, I have to wonder whether a substantial portion of the transmission lines’ capacity will go unused for a significant number of years.”
It appears increasingly unlikely that Congress will extend the production tax credits before they expire at the end of the year. Natural gas also is used to fuel many electric generating plants, and experts have estimated that natural gas prices need to remain above $6.50 for wind generation to remain profitable without the tax credits. But natural gas prices remain well below that level and there’s little indication that high prices will return any time soon.
Oliveira wrote that wind energy development has slowed in Texas and the actual amount of wind power being added has become marginal in recent years. The state representative called upon regulators to determine how much power is currently generated in the area of the proposed lines and how much more likely will be added. He noted that the original cost estimates missed the mark by about 42 percent, and that the latest estimates of about $7 billion could place a heavy burden on home consumers.
“Residential customers could face monthly fees of $4.26 to $7.10 — neither amount is unsubstantial on a residential customers’ bill,” Oliveira wrote. The Dallas Morning News has estimated separately that the money to be sunk into the new transmission lines could pay all Texas household electric bills for seven month or could finance 176 million fluorescent light bulbs with LED lights, which could provide enough energy savings to shut down 10 coal plants.
A spokesman for Rep. Oliveira said he hasn’t heard back yet from the PUC, and doesn’t expect to hear back for another week or so.
For more information about wind development in Texas, check out the new report from the Texas Coalition for Affordable Power. You can make use of the search function to research issues relating to the Texas energy market.
Is a policy analyst consultant for TCAP, a coalition of political subdivisions in Texas that purchase electricity in the deregulated market for their own governmental use. Because energy costs are typically a significant budget item to our members, TCAP is consistently looking for ways to save our members money, through cost-saving contracts, energy efficiency or demand response programs.