Midwest Alerts

December 7, 2011
Midwest energy summit set for March 2012

Following approval by the Advisory Board to sponsor an energy summit early next year to build a unified voice from all organizations interested in new energy policy, the Summit Strategy team has confirmed March 21, 2012, for holding the 2012 Energy Moves Michigan Forward summit, with Lansing as the most appropriate location.

In a letter to potential sponsors, Executive Director Tim Bannister summarized the benefit to holding the energy summit. "This is a state that has led the world in several areas...from cars to corn flakes." he wrote. "Today, however, we stand at a critical juncture in developing a new industry for Michigan. It's well-known that we need to diversify the industrial base in Michigan; likewise, we realize that we must take new approaches to create further business opportunities.

"Clean renewable energy technology is the future, and with $10 billion already invested and more than 220 manufacturers supplying wind and solar components, we've already started down the path to make it part of Michigan's future," he continued. "For Michigan's manufacturers and service providers to leverage this base and capture the lead requires advocating for renewable energy initiatives that provide a consistent platform for driving new business. As an alliance of business owners, Midwest Integrated Suppliers for Renewable Energy will become the unifying voice in promoting policy change to increase renewable energy manufacturing, investment and jobs in Michigan."

Summarizing the unique role that Midwest Integrated Suppliers will play, Bannister explained how the alliance will coordinate all parties in support of initiatives that increase renewable energy-related manufacturing and services; advocate for policy change that incorporates a greater incentive to use Michigan Content; and educate audiences as to the benefits of these proposed initiatives. There will be several outcomes as a result of supporting alliance, including a stabilized workforce, increased investment in the state, and quality renewable energy in play.

Three task forces are charged with providing key criteria to be addressed at the summit identifying the various energy initiatives that can be supported; incorporating Michigan Content language in proposed initiatives the summit supports; and determining how to best implement the policies that summit attendees support.

Additionally, the energy summit will serve as an anchor for an alliance start-up package that will be offered to "founding sponsors," or companies interested in building relationships with the membership, as well as supporting energy policy change. Advisory Board Members Bill Gagliardi and Frank Kirschner will be part of the team calling on selected major companies and firms beginning this month. ###

Should Congress renew clean-energy tax credits?

Several clean-energy tax credits will expire at year's end if Congress does not renew them for at least one more year. A Treasury Department grant program for renewable energy such as solar power is set to expire, as well as tax credits for the ethanol industry. A key production tax credit (PTC) for renewable energy-especially wind power-expires next year unless Congress renews it. A separate bill supports extending the PTC for four years.

Should Congress renew some or all of these tax provisions? What factors, such as the deficit and job creation, should influence lawmakers' decisions on this? How will this debate affect the broader discussion over the federal government's role in developing nascent clean-energy technologies? Following are comments from those most affected by federal support of renewable energy...

From Denise Bode, CEO, American Wind Energy Association: Congress should extend the renewable energy production tax credit before the end of this year. Here's why: First, American manufacturing jobs are coming back, with tens of thousands of new jobs from wind power. But they will vanish if the credit expires...For the purposes of the American wind industry manufacturing sector, which needs lead time to make its products, the PTC effectively expires at the end of this year. To preserve tens of thousands of good-paying manufacturing jobs, the wind energy industry urgently needs Congress to take action to extend the PTC before year's end.

Second, the PTC is a proven, effective tool to keep electricity rates low and encourage development of proven renewable energy projects. The past four years of stable tax policy demonstrate the economic security and energy diversity benefits that the wind industry can continue to provide in a stable policy environment. During those four years, the wind industry has grown at an annual rte of 37 percent. Today, more than 400 facilities across 43 states manufacture for the wind energy industry, and 60 percent of a wind turbine's value is now produced here in America, compared to 25 percent prior to 2005. And the price of American wind power has dropped by more than 90 percent since 1980, benefiting utilities and consumers, and more than $60 billion of investment has been made since 2005.

Third, the PTC directly impacts American wind energy investment and project development. The wind industry's boom-and-bust cycle is evidence that the PTC affects project development. When it has been allowed to expire in the past, installations have dropped between 73 and 93 percent, with corresponding job losses.

Finally, the PTC is a performance-based business tax credit that is supported on a bipartisan basis. It applies only to actual electricity produced from utility-scale wind turbines-a wind project developer does not receive the credit until the wind turbine actually generates power. Because it is a business tax credit, funding is based solely on project performance, not evaluation by government officials. The PTX has been supported on a bipartisan basis in the past, and continues to receive support from both sides of the aisle.

From The Boston Globe: The weaknesses and the ironies of American energy policy were on display in Washington last month, as a House committee grilled Energy Secretary Steven Chu over a federal loan guarantee to a now-bankrupt solar-technology company called Solyndra...But Solyndra's subsequent failure isn't a sign that the (Obama) administration has gone too far; rather, it's a sign that Congress, which tolerates all manner of explicit and implicit subsidies for fossil fuels and corn ethanol, hasn't done nearly enough to level the playing field for renewables such as solar and wind power.

Federal initiatives to promote clean-energy initiatives have largely focused on the supply side-by funding research into new technologies, by enacting tax credits that encourage new projects, and by offering loans and other assistance to specific startup companies that might not be able to obtain private financing...Such efforts are, in fact, helping an important sector take root...Still, there's no denying that not all of these bets pay off, and this approach undoubtedly puts public officials in the uneasy position of making judgments about private companies...Yet the charges of "market manipulation" and "crony capitalism" ring false-especially in light of the significant boost federal policies give to other energy sectors.

Between 2002 and 2008, the US government spent $70 billion to subsidize traditional energy sources and $17 billion to subsidize corn ethanol. Congress has favored traditional fossil-fuel producers in one other key way: by declining to enact measures, such as cap-and-trade or carbon-tax plans, that would incorporate the long-term environmental costs of fossil fuel use into the price that energy users pay. Bringing those costs into the equation significantly reduces the price advantage of fossil fuels-and increases the relative attractiveness of clean-energy projects to private investors.

Failing that, Congress could also stimulate demand for renewables in a more modest way-by imposing a national renewable-energy mandate similar to the state-enacted one already in place in Massachusetts...Congress has been meddling (in the energy marketplace) for decades. What it needs to do is throw its weight behind cleaner approaches.

From cleantechnica.com: Due to expire at year-end, a coalition made up of more than 750 clean energy companies, small businesses and other organizations on Nov. 30 sent a letter to Congress calling for legislators to extend the Treasury Dept.'s Section 1603 grant program for another year...Enacted in 2008, the Treasury 1603 grant program allows companies that invest in and develop clean energy projects to receive a cash grant in lieu of investment tax credits that would have increased their net income over a period of subsequent years. Front-loading and monetizing these investment tax credits has provided critical cash flow to these companies as they have struggled to recover from the collapse of the tax equity market that began with the 2008 economic crisis...

An independent study conducted for the Solar Energy Industry Association (SEIA) determined that extending the program through 2012 would result in the creation of an additional 37,000 jobs in the solar energy industry alone in 20112, a 12 percent increase over baseline. The letter spells out the likely impact of the grant program's expiration, noting that total financing available for energy projects would shrink by 52 percent in 2012. This would stifle job creation and severely restrict the market's ability to leverage private sector capital to finance new domestic energy projects...

Industry and business leaders representing solar, wind, biogas, combined heat and power (CHP) and fuel cells all came out with public statements calling for the extension of the Treasury 1603 grant program to help them compete on a more level playing field. They're not alone. A nationwide poll showed that just shy of 9 out of 10 Americans (89 percent) think it's important for the U.S. to develop and use solar energy...

Clean energy critics will slam this latest effort as another call to subsidize businesses that aren't, and will never be, economically sustainable. Balderdash! An oil and fossil fuel industry oligopoly, including the most profitable companies in world history, continues to enjoy the benefits of even greater tax credits and subsidies. Furthermore, federal, state and local governments have historically played central seminal roles in U.S. economic development by channeling private sector investment into specific areas, as well as creating demand directly...

Looking across the board-be it wind, solar, geothermal, waste-to-energy, biogas, fuel cells, hydro or marine power, a veritable tidal wave of innovation and socially, environmentally beneficial and productive economic activity is being unleashed. Costs have been declining, the performance and efficiencies of technology and businesses have been increasing, and job creation continues to grow along with end-user demand...

From Arnold Schwarzenegger, The Washington Post: More energy from the sun hits Earth in one hour than all the energy consumed on our planet in an entire year.

In those terms, it is absurd that our federal government spends tens of billions of dollars annually subsidizing the oil industry, which pulls diminishing resources from underground, while the industry focused above ground on wind, solar and other renewable energies is derided in Washington.

Federal support for development of new energy sources is lower today than at any other point in U.S. history, and our government is forcing the clean-energy sector into a competitive disadvantage. To bring true competition to the energy market, ensure our national security and create jobs here rather than in China or elsewhere, we must level the playing field for renewable energies. In this presidential primary, Americans need to hear where the candidates stand on this critical issue.

Don't get me wrong-we should not demonize fossil fuels...From the land grants for timber and coal in the 1800s to the tax expenditures for oil and gas in the early 20th century to the investment in developing nuclear energy, support for energy innovation has always helped drive America's growth.

Renewable energies, however, have not been treated the same way. When the oil, gas and nuclear industries were forming, federal support for those energies totaled as much as 1 percent of federal spending. Subsidies available to the renewables industry today are just one-tenth of 1 percent...

Federal investment is critical to the success of the renewable energy industry. That's not a new idea. The same was true for coal, which would not have been economically feasible without tax exemptions and incentives. It was also true for offshore oil drilling, which was deemed unprofitable without royalty waivers and favorable packaging of federal leases.

Imagine what the renewables industry would look like if the federal government leveled the playing field and showed the same dedication we have in California. Our green sector is the brightest spot in California's economy, having grown 10 times faster than any other business sector since 2005. Today, one in every four jobs in the U.S. solar industry is in California. One-third of U.S. clean-tech venture capital flows into our state. Nurturing the green-tech sector was the right thing for me to do as governor, and it is the right thing for the federal government to do...

From denverpost.com: ...The wind production tax credit will expire at the end of 2012 unless members of Congress extend it. They should.

The tax credit costs the government about $1.5 billion annually...That's no small amount, and yes, we understand this is a time of fiscal difficulty. However, we think the wind production tax credit is crucial to the diversification of the nation's energy portfolio. Continuation of the credit must be part of the equation as Congress tackles the federal deficit and decides which expenditures are important an how to pay for them. This country must continue to look to development of renewable energy and reduced dependency on fossil fuels. It's important to our nation's energy independence, and to reducing greenhouse gas emissions.

In Colorado, the tax credit is also a jobs issue...(E)xpiration of tax credit could result in as much as an 85 percent drop in wind installations. Vestas Wind Systems has four plants in Colorado. The company's $1 billion investment has created some 1,700 jobs, which include jobs created at supplier businesses...A Vestas spokesman (said) that the looming expiration of the tax credits has essentially stalled wind energy investment beyond 2012...

In the last six to eight months before expiration, lenders hesitate to invest in wind projects due to financial uncertainty. The boom and bust cycle is detrimental to the industry's long-term prospects, according to a letter sent to congressional leaders by the Governors' Wind Energy Coalition. The group has 23 members, including Colorado Gov. John Hickenlooper. The governors asked federal lawmakers to support recently introduced legislation that would extend the credit for four years. It seems hard to imagine this polarized Congress could find common ground on this issue in a presidential election year, but we surely hope it finds a way. Wind industry development and jobs are an important piece of the nation's energy future.

From north American WINDPOWER: Iowa Gov. Terry Branstad and Rhode Island Gov. Lincoln Chafee have written a letter to Senate Majority Leader Sen. Harry Reid, Senate Republican Leader Sen. Mitch McConnell, House Speaker Rep. John Boehner and House Democratic Leader Rep. Nancy Pelosi urging Congress to promptly pass a multiyear extension of the wind energy production tax c red (PTC).

"The United States has some of the best wind resources in the world, but our lack of long-term national policies hinders our ability to develop them fully," the governors stated in the letter. "Without policy certainty, investors, developers and manufacturers will move projects and jobs elsewhere."

And from here in Michigan in a recent Crain's Detroit Business: Michigan wind turbine suppliers predict a downturn in business if Congress fails to approve a bill to extend the 2.2 cent per kilowatt-hour electricity production tax credit by early next year.

Earlier this month, a bipartisan bill, HR 3307, the American Renewable Energy Production Tax Credit Extension Act, was introduced in Congress to grant a four-year extension to the production tax credit, which expires Dec. 31, 2012. The tax credit helps energy developers raise private funds, which have averaged $17 billion annually the past four years, to build renewable energy projects. The credit also lowers the cost of wind energy to make it more competitive with oil, gas and nuclear energy.

While Michigan is part of the 29-state Governors' Wind Energy Coalition that is lobbying for the extension (see earlier reference), Gov. Rick Snyder has not taken a position on the issue. But Jeff Metts, president of Eaton Rapids-based Dowding Industries, a wind turbine component manufacturer, said Dowding's 4-year-old wind division may not survive without the tax credit.

Metts went to Washington where he met with his legislators, including Rep. Tim Walberg, a Republican from Tipton, about extending the tax credit. "I told (him) the wind industry needs to be developed and be supported so it makes products and a profit," Metts said. "He listened and seems to understand but talked about how (the federal government) can't continue to subsidize us. I said you have been subsidizing o9il and gas for 40 years, and they don't need it anymore. We just need it for another five years."

Along with Michigan's renewable energy standards, the federal production tax credit, which originally was approved in 1992 and extended four times, is largely responsible for the growth of the wind industry in Michigan, said Peter Gibson, vice president of sales with Danotek Motion Technologies, a Canton Township-based wind turbine component maker that produces an advanced permanent magnet generator.

"There is a big effort to extend the tax credit because the companies that develop the wind farms need to have some certainty about the financials of the commitment of their projects before Jan. 1, 2012," Gibson said. "If the credit is not extended in the next few months, there is a risk of those developers delaying purchase of turbines and services, which could result in a significant slowdown in orders and business," Gibson said.

Editor's note: There is no question that Michigan's manufacturers and service providers should support extension of the U.S. Treasury Dept.'s Section 1603 grant program and the introduction of HR 3307, the American Renewable Energy Production Tax Credit Extension Act. To make sure that your voice is heard, contact your Congressman (http://www.govtrack.us/) and Gov. Rick Snyder (Rick.Snyder@michigan.gov).(Other sources include:: north American WINDPOWER; New York Times; www.cleanbreak.ca; earthtechling.com; thewmeachblog.org; thinkprogress.org; EERE News; www.grist.org; michiganradio.org; MichiganAdvantage.org; GLREA Lakes Energy News, John Sarver, Editor)
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Midwest Alert, Vol. 2, Issue 14, Dec. 7, 2011, is published by Midwest Integrated Suppliers for Renewable Energy LLC, Tim Bannister, Editor, 1000 S. Old Woodward Ave., Suite 201, Birmingham, MI 48009. Toll-free: 888.244.0047; Email: tbannister2@integrated-suppliers.com. Our mission: To spearhead implementation of initiatives that support business opportunity in the clean energy sector for Michigan's manufacturers and service providers.