To: Senator Ben Cardin From: Catherine McGrath Title: Wind Power Dont Let it Blow Away Re:

: Wind Power Ta Credit Renewal Date: A!ril "#$ "%&" Introduction Wind ener'y i( an )!*and*comin' renewa+le ener'y (o)rce in the ,nited State(Accordin' to the De!artment o. /ner'y$ wind !ower co)ld ()!!ly )! to "%0 o. the nation( ener'y +y "%1%- 2n order .or wind !ower to reach thi( 'oal$ it i( im!ortant to renew the c)rrent ta credit !ro'ram(- The !rimary .inancial !olicie( .or the wind ind)(try$ the Prod)ction Ta Credit and the 1%0 2n3e(tment Ta Credit$ are (et to e !ire on Decem+er 1&$ "%&" 4American Wind /ner'y A((ociation "%&&5- Witho)t the(e ta credit($ the mar6et .or )tility*(cale t)r+ine( will +e )n!redicta+le- Wind ener'y com!anie( will +e le(( li6ely to in3e(t in lar'e*(cale wind ener'y !ro7ect($ which will !re3ent the ,nited State( .rom reachin' the .)ll !otential o. wind !rod)ction- A( a !re3entati3e mea()re$ it i( e((ential to dra.t wind ener'y le'i(lation and 3ote .or the renewal o. the wind ener'y ta credit- Wind ener'y will +ene.it the nation a( a whole in addition to local and (tate economie($ e(!ecially in the (tate o. Maryland- Thi( memo will e !lain three o!tion( .or wind !olicy renewal o. the ta credit$ !ha(in' o)t the ta credit$ and no actionBackground Wind i( con(idered a .orm o. (olar ener'y the )ne3en heatin' o. the atmo(!here +y the ()n$ the rotation o. the earth$ and the irre')laritie( o. the earth( ()r.ace each ca)(e wind- T)r+ine( harne(( the nat)ral 6inetic ener'y o. the wind and con3ert it into mechanical !ower- The +lade( o. the t)r+ine (!in$ which rotate( a (ha.t connected to a 'enerator to !rod)ce electricity- There are two ty!e( o. wind t)r+ine(:

3ertical*a i( de(i'n$ (ha!ed li6e an e''+eater$ and the more common hori8ontal*a i( de(i'n- 9ori8ontal*a i( t)r+ine( are made )! o. either two or three +lade( that .ace into the wind- ,tility (cale t)r+ine( ran'e in (i8e .rom &%% 6ilowatt( to (e3eral me'awatt(The(e lar'er t)r+ine( are )()ally 'ro)!ed into wind .arm( that can !rod)ce ener'y .or a )tility 'rid that !ro3ide( electricity to home( and +)(ine((e( 4,-S- /ner'y 2n.ormation Admini(tration "%&"5Wind ener'y ha( m)lti!le en3ironmental and economic +ene.it(- Wind ener'y i( an emi((ion(*.ree electricity (o)rce- Con3er(ely$ the !rod)ction o. non*renewa+le (o)rce( ()ch a( oil$ nat)ral 'a($ and coal ca)(e (i'ni.icant emi((ion( o. 'reenho)(e 'a(e(For each )nit o. electricity 'enerated$ wind ener'y emit( the e:)i3alent o. &0 o. coal emi((ion( and "0 o. 'a( emi((ion(- 2. the ,nited State( !rod)ced "%0 o. it( electricity .rom wind ener'y$ ann)al car+on dio ide emi((ion( wo)ld +e red)ced +y ;"< million metric ton( 4=ational Renewa+le /ner'y La+oratory "%%;5- Additionally$ wind ener'y create( many lon'*term 7o+( in com!onent man).act)rin'$ con(tr)ction and in(tallation$ maintenance$ mar6etin'$ and tran(!ortation- The wind ener'y ind)(try em!loyed ;<$%%% American( in "%&& and in3e(ted a!!ro imately >"? +illion in the ,-S- economy in "%%@ and "%&% 4,-S- De!artment o. /ner'y "%&&5- The 7o+ creation and re3en)e .rom thi( ind)(try will (tim)late the economy and decrea(e the .ederal de.icit- Wind ener'y i( a dome(tic ener'y (o)rce that can decrea(e the ,nited State( de!endence on .orei'n co)ntrie(- 2n "%&%$ the ,-S- im!orted almo(t 1%0 o. their total ener'y 4,-S- Cen()( B)rea) "%&"5- By acce((in' the .)ll !otential o. wind ener'y$ the ,nited State( co)ld (i'ni.icantly red)ce the need .or im!ort(- Finally$ wind ener'y )(e( le(( water than traditional ener'y 'eneration (o)rce(- Thermoelectric !ower alone con(tit)te( <10 o. water con()m!tion in the ,nited State( 4Lon'$ A)d6o..$ and Torcellini "%%15-

Critic( o. wind ener'y ar')e that en3ironmental im!act o)twei'h( the +ene.it( o. wind ener'y- Some en3ironmentali(t( claim that wind t)r+ine( will detrimentally a..ect +ird (!ecie(- 9owe3er$ wind t)r+ine( ca)(e le(( than &0 o. anthro!o'enic$ or h)man ind)ced$ +ird mortality- Com!arati3ely$ +)ildin'( and window( ca)(e <<0 o. anthro!o'enic +ird mortality- Bil (!ill($ acid rain$ and mo)ntainto! minin' al(o ca)(e a3ian mortality- Th)($ wind t)r+ine( !o(e a (i'ni.icantly (maller im!act on +ird (!ecie( than c)rrent ener'y (o)rce(- B!!onent( o. wind ener'y al(o claim that wind t)r+ine( are )n(i'htly and lo)d and there.ore ca)(e a decrea(e in !ro!erty 3al)e- While (ome mi'ht +e +othered +y the a!!earance o. a wind .arm$ other( .ind them intere(tin' and e3en +ea)ti.)l- F)rthermore$ the noi(e ca)(ed +y a wind t)r+ine i( a!!ro imately e:)i3alent to the h)m o. a r)nnin' 6itchen re.ri'erator- Accordin' to the Renewa+le /ner'y Policy Pro7ect o. "%%1$ !ro!erty 3al)e( o. home( within ; 6m o. wind t)r+ine( were not ad3er(ely a..ected- 2n .act$ !ro!erty 3al)e( ro(e in (ome comm)nitie( located in clo(e !ro imity to wind !ro7ect( 4=ational Renewa+le /ner'y La+oratory "%%;52n "%&%$ the wind ener'y ind)(try 'rew +y &<0 with the in(tallation o. o3er <$%%% MW o. 'eneratin' ca!acity eno)'h to ()!!ly !ower to more than &-" million home(- 1; (tate( c)rrently ha3e )tility (cale wind !ro7ect(- De(!ite thi( !ro're(($ the ,nited State( i( (till (econd to China in term( o. in(talled wind ca!acity 4Bolin'er and Wi(er "%&&C American Wind /ner'y A((ociation "%&&5- To remain com!etiti3e in the 'lo+al clean ener'y mar6et$ the ,nited State( m)(t increa(e their (hare o. wind ca!acityA!!ro imately &% million MW o. ener'y are a3aila+le .rom land*+a(ed wind !ro7ect($ +)t the ,nited State( (till relie( on non*renewa+le re(o)rce( .or @%-10 o. ener'y !rod)ction 4Bolin'er and Wi(er "%&lC ,-S- Cen()( B)rea) "%&"5- The reliance on non* renewa+le (o)rce( .or the ma7ority o. ener'y !rod)ction i( a hindrance to the

de3elo!ment o. the ,nited State(- 2n order to 6ee! !ace with the de3elo!ment o. other nation($ the ,-S- m)(t +e'in to !rod)ce more ener'y .rom renewa+le ener'y (o)rce( ()ch a( wind !owerWind ener'y can +e a!!ealin' to +oth the Democratic and Re!)+lican PartyDemocrat( are !lea(ed with wind ener'y +eca)(e it !ro3ide( emi((ion(*.ree electricity and will red)ce the con()m!tion o. non*renewa+le and hi'hly !oll)tin' re(o)rce(Re!)+lican( are !lea(ed with the !otential to (tim)late the economy +y creatin' lon'* term man).act)rin' and en'ineerin' 7o+(- Thi( +alance o. the en3ironment and the economy i( !alata+le .or +oth !artie(- Beca)(e o. the e treme +i!arti(an(hi! in Con're(($ ener'y !olicy le'i(lation m)(t a!!eal to +oth end( o. the (!ectr)mWind ener'y i( an e(!ecially (alient i(()e +eca)(e the Prod)ction Ta Credit and the 1%0 2n3e(tment Ta Credit are (et to e !ire on Decem+er 1&$ "%&"- The PTC wa( created )nder the /ner'y Policy Act o. &@@"- 2t !ro3ide( an income ta credit o. "-" cent( !er 6ilowatt*ho)r .or the !rod)ction o. electricity .rom )tility*(cale wind t)r+ine(- The PTC al(o o..er( credit .or di..erent ty!e( o. renewa+le ener'y ()ch a( +ioma(($ 'eothermal$ and hydroelectric at a rate o. &-& cent( !er 6ilowatt*ho)r- The 2TC wa( de3elo!ed thro)'h Section &#%1 o. the American Reco3ery and Rein3e(tment Act o. "%%@- Wind !ro7ect de3elo!er( can choo(e the 1%0 2TC in !lace o. the PTC- De3elo!er( can recei3e a ca(h !ayment e:)i3alent to 1%0 o. the in3e(tment .or !ro7ect( that +e'an +e.ore "%&& and will +e com!leted and in (er3ice +e.ore "%&1- Thi( !ayment i( .)nded +y the De!artment o. Trea()ry 4Data+a(e o. State 2ncenti3e( .or Renewa+le /ner'y and /..iciency "%&&5Description of Options/Arguments The .ir(t wind ener'y !olicy o!tion i( to renew the Prod)ction Ta Credit and the

1%0 2n3e(tment Ta Credit- A ten*year renewal o. the Prod)ction Ta Credit wo)ld !ro3ide a "-" cent !er 6ilowatt*ho)r income ta credit )ntil Decem+er 1&$ "%""- A ten* year renewal o. the 1%0 2n3e(tment Ta Credit wo)ld allow de3elo!er( to recei3e a ca(h !ayment o. 1%0 o. their !ro7ect in3e(tment )ntil Decem+er 1&$ "%""- Thi( o!tion i( !re.erred +y the wind ind)(try in order to en()re mar6et con(i(tency- The(e incenti3e( will ca)(e more in3e(tor( and de3elo!er( to +e'in new wind !ro7ect(- A( a re()lt$ the(e wind !ro7ect( co)ld hel! the ,nited State( reach the 'oal o. "%0 wind !ower +y "%1%The PTC ha( +een ()cce((.)l .or the !a(t ten year( +eca)(e it ha( enco)ra'ed the wind ind)(try to 'row at a a3era'e rate o. 1"0 each year 4Bolin'er and Wi(er "%&&5- 2. the wind ind)(try contin)e( to 'row$ wind ener'y can meet the ,nited State( increa(in' ener'y demand( witho)t com!romi(in' en3ironmental :)ality- The economy will +ene.it .rom the ta credit renewal in m)lti!le way(- R)ral landowner( will +e more li6ely to in3e(t in wind ener'y !ro7ect( and$ d)e to the ta credit$ their indi3id)al economic !ro(!erity will increa(e- Additionally$ the wind ind)(try can ()!!ort ro)'hly <%%$%%% 7o+( that will +oo(t the national economy 4American Wind /ner'y A((ociation "%&&5Finally$ ener'y !rice( will +ecome increa(in'ly (ta+le +eca)(e o. red)ced de!endence on .orei'n .o((il .)el(There are draw+ac6( to the ten*year renewal o. the wind ener'y ta credit(- Mo(t im!ortantly$ the contin)ation o. .)ndin' .or ten additional year( will (train the national 'o3ernment- The PTC ha( co(t a!!ro imately ># +illion dollar( o3er the !a(t < year( 4=atter "%&"5- Some may :)e(tion i. the money allocated .or the ta credit( will act)ally e:)al the money 'enerated .rom the new wind !ro7ect(- Al(o$ i. more time$ e..ort$ and money are (!ent to de3elo! wind ener'y !ro7ect($ other (o)rce( o. renewa+le ener'y may +e )nderde3elo!ed- To ma imi8e ener'y (ec)rity$ the ,nited State( (ho)ld !)r()e all

!romi(in' renewa+le ener'y (o)rce($ incl)din' (olar$ +ioma(($ 'eothermal$ and hydro!owerThe ne t wind ener'y !olicy o!tion i( a 'rad)al !ha(e o)t o. the ta credit2n(tead o. renewin' the 2TC and PTC .or an additional ten year($ Con're(( co)ld renew the(e ta credit !olicie( .or a!!ro imately .o)r to (i year(- Con're(( co)ld al(o 'rad)ally red)ce the incenti3e .or each ta credit$ !erha!( +y red)cin' the PTC +y a rate o. %-" cent( !er 6ilowatt*ho)r each year or +y red)cin' the 2TC +y <0 e3ery two year(Sta6eholder( in the wind ind)(try ()!!ort a 'rad)al !ha(e o)t +eca)(e it can !ro3ide mar6et (ec)rity witho)t creatin' de!endence on the ta credit 4=atter "%&"5- 2n3e(tor( and de3elo!er( wo)ld +e aware o. the ta credit e !iration and !lan their !ro7ect( accordin'ly- A.ter the ta credit( e !ire$ the wind ind)(try wo)ld +e (ta+le eno)'h to maintain !rod)ction witho)t ta incenti3e(- 2. not$ the minim)m 3al)e o. each ta credit co)ld +e maintained )ntil the wind ind)(try +ecome( (ta+le- Thi( method o..er( (imilar +ene.it( to the ten*year ta credit renewal- Partial renewal o. the wind ener'y ta credit will increa(e clean ener'y$ !ro(!erity o. r)ral landowner($ 7o+ creation$ and (ta+ility o. ener'y !rice(- Beca)(e le(( time$ e..ort$ and money are +ein' (!ent on wind ener'y$ other (o)rce( o. renewa+le ener'y can +e de3elo!ed- Thi( will !ro3ide o3erall ener'y (ec)rity .or the ,nited State( +y com+inin' dome(tic renewa+le (o)rce( with .orei'n and dome(tic non*renewa+le (o)rce($ when nece((aryThe !olicy o!tion to !ha(e o)t the ta credit i( al(o (li'htly .lawed- There i( a !o((i+ility that a !artial renewal o. the ta credit will not +e eno)'h to maintain the wind ind)(try and !romote (ta+ility- 2. thi( i( the ca(e$ the minim)m 3al)e o. the ta credit can +e renewed )ntil the mar6et i( (ta+le- ,n.ort)nately$ i. there i( a la!(e +etween the e !iration o. the red)ced ta credit and it( renewal$ the mar6et co)ld +e detrimentally

a..ected- Lender( may he(itate to in3e(t in new wind !ro7ect( +eca)(e the ta credit i( )ncertainThe .inal !olicy o!tion .or the wind ind)(try i( no action at all- Con're(( can (im!ly decide not to renew the ta credit and lea3e the wind ind)(try to de3elo! on it( own- Thi( o!tion wo)ld allow .or more money and e..ort to +e (!ent on the contin)ed )(e o. .o((il .)el( and the e !loration o. other renewa+le (o)rce(- The money that wo)ld +e )(ed to .)nd the ta credit co)ld +e allocated to di..erent !ro7ect( 4=atter "%&"5The Dno actionE !olicy wo)ld +e 3ery harm.)l to the wind ind)(try- 2ncrea(ed )ncertainty in the wind ener'y mar6et will ca)(e 7o+ layo..( +eca)(e .ewer wind !ro7ect( will +e'in- De3elo!er( may r)(h to .ini(h their !ro7ect( +e.ore the Decem+er 1&$ "%&" deadline$ ca)(in' hi'h !rod)ction co(t( .rom (hort*term !lannin' mi(ta6e(- =ew in3e(tor( wo)ld +e rel)ctant to commit to new !ro7ect( +eca)(e o. red)ced incenti3e( +e'innin' in "%&1- =ew wind ener'y !ro7ect( can +e 3ery e !en(i3e witho)t the ta credit and$ a( a re()lt$ the wind ind)(try co)ld (tall or .ail com!letely with the a+(ence o. the PTC and 2TCRecommendations The mo(t e..ecti3e !olicy o!tion i( to 'rad)ally !ha(e o)t the Prod)ction Ta Credit and the 2n3e(tment Ta Credit- Thi( !olicy will allow the wind ind)(try to contin)e to 'row and de3elo! witho)t creatin' economic de!endency on the ta creditDe3elo!er( and in3e(tor( will +e con.ident to +e'in new !ro7ect( .or the remainder o. "%&" into "%&1 and +eyond$ +)t will +e aware o. the yearly red)ction o. incenti3e(- Bne year !rior to the e !iration o. the ta credit$ Con're(( (ho)ld e3al)ate the .)t)re need o. the ta credit- 2. the wind ind)(try i( (till )n!redicta+le$ i. new wind !ro7ect( are (till e !en(i3e$ and i. de3elo!er( are (till rel)ctant to +e'in !ro7ect($ then Con're(( (ho)ld

renew the ta credit- 2. the wind ind)(try i( (ta+le and .lo)ri(hin'$ there i( no need .or contin)ation o. the ta credit and Con're(( can di(contin)e incenti3e( .or wind ener'yWith the 'rad)al !ha(e o)t o. the ta credit$ money can (till +e allocated toward( the de3elo!ment o. other renewa+le re(o)rce(- Thi( will .)rther decrea(e the de!endence on .o((il .)el( and allow the ,nited State( to ha3e a more com!rehen(i3e and (ta+le ener'y !olicy- A( the wind ind)(try contin)e( to 'row to it( .)ll !otential$ 'reenho)(e 'a( emi((ion( will decrea(e$ leadin' to a healthier en3ironment .or h)man( and animal(- Both the Democratic and Re!)+lican !artie( will +e !lea(ed with the re()lt(- Democrat( will ()!!ort the !)r()it o. clean ener'y and Re!)+lican( will .a3or the creation o. new ind)(try 7o+(Conclusion Wind ener'y i( a !romi(in' and e..ecti3e (o)rce o. electricity in the ,nited State(- Action m)(t +e ta6en immediately to +e'in the !ha(e o)t o. the wind ener'y ta credit- Pha(in' o)t the ta credit will !rotect the wind ind)(try +y !ro3idin' (ta+ility and incenti3e(- 2n t)rn$ the en3ironment and the national economy will +ene.it (i'ni.icantlyThe ,nited State( need( the wind ind)(try to re3itali8e the economy$ im!ro3e en3ironmental :)ality$ and increa(e national (ec)rity- 2. the wind ind)(try reache( it( !otential o. "%0 +y "%1%$ the ,nited State( will contin)e to +ene.it e3en year( later-