GE fights to keep tax credits alive

Fairfield, Conn.based General Electric (NYSE: GE) isn't giving up on the renewable tax credit.

The latest bid to extend the U.S. credit failed again in the Senate this week, but GE is hoping to appeal to lawmakers' bottom line needs with a report released today that argues that the credit generates more federal tax revenue than the cost of the incentive program.

The Production Tax Credit is set to expire at the end of this year.

"We were frustrated with the fact that we saw both parties favoring renewables, supporting it. There really wasn't any debate about that, it was how to pay for it," said Kevin Walsh, managing director of renewable energy at GE Energy Financial Services, in a press conference in New York.

According to GE, wind farms built in 2007, supported by the PTC, carry an estimated net present value to the U.S. Treasury of $250 million.

The company's numbers are based on the assumption that it takes approximately two years to build the wind farms and that they continue to operate for 20 to 25 years.

The study does not take into account any taxes paid to state or local governments, or environmental benefits.

"This is purely federal, federal benefits," said Walsh.

GE has a big stake in the wind industry as a manufacturer and a financial backer. It's the leading manufacturer of wind turbines in the U.S., and wind makes up 80 percent of GE Energy Financial Services' more than $3 billion global renewable energy portfolio.

In the U.S., the GE financial unit's total wind portfolio includes 34 farms that span 13 states and produce 3,550 megawatts of energy.

Late last year, a new energy bill was signed into law in the U.S., but had been stripped of some major incentives for the cleantech industry, including an extension for renewable tax credits (see U.S. solar & wind incentives on the way?).

GE said the latest congressional squabble over the tax credit centered on how to offset the cost of the program.

Randall Swisher, executive director of the Washington, D.C.-based American Wind Energy Association, said, "For our major companies, they're looking increasingly at markets like China or India."

"Why invest here in the U.S. when there are other markets that are much more stable over the longer term?"

While GE's study offers up the numbers on long term payouts, lawmakers may be more concerned with getting the upfront money needed to pay for the incentives.

The PTC currently offers 2.1 cents per kilowatt for wind, closed-loop biomass and geothermal, and 1 cent per kilowatt for open-loop biomass, small irrigation hydroelectric, landfill gas, municipal solid waste resources, and hydropower.

Earlier proposals for an extension of renewable tax credits would have taken the cash from repealing tax breaks for oil and gas companies (see U.S. Congress to look at $21B energy tax package).

"What we've been saying to congressional leadership on both sides of the aisle is that it is up to you to find a solution, to sit down together and negotiate an effective solution to this challenge," said Swisher.

"The partisan divide is so deep, almost anything we say or do could be misinterpreted as taking sides in what is a very deep partisan conflict."

Since it was established in 1992, the PTC has been allowed to lapse three times, in 1999, 2001, and 2003. GE said that each time the expirations caused annual wind capacity additions to drop 76 to 90 percent.

Walsh said, "The numbers that we see — the projects that we see in the industry — removal of this benefit, the vast majority of the projects are not viable."

Walsh forecasts a possible $12 billion worth of wind projects in 2009 in the U.S., or 6 gigawatts of installed capacity. He said the loss of the PTC could affect most of those, with projects either not proceeding or the turbines being placed elsewhere.

There were 5.2 gigawatts of wind installed in the U.S. in 2007.

A recent report from the U.S. Department of Energy said wind power could provide up to 20 percent of the nation's total electricity needs by 2030 (see Wind power push could depend on incentives).

But that scenario would cost at least $43 billion to implement, including the cost of new transmission lines, and would likely depend on tax incentives to spur industry participation.

For GE's financial unit, without the PTC the group is likely to cut back on its U.S. wind investments.

"We basically say, we will fund the project assuming you either get it done in time by the end of '08 or if the PTCs are extended," said Walsh.

"And if they're not, we're not there for you. Sorry, we don't get paid for that."

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