Lobbying efforts are underway to persuade Republicans from coastal states with a heavy oil-and-gas industry presence that offshore wind development means jobs.
If the U.S. offshore wind market gets an extension of its main federal subsidy, it may owe a thank you to the oil and gas industry.
Two bills recently introduced in the U.S. Senate — one of them on a bipartisan basis — would extend the 30 percent federal tax credit for offshore wind projects for another six to eight years, giving the nascent industry more time to get on its feet. The prolongation could be included in a tax extenders package likely to come up for a vote this fall.
The American Wind Energy Association (AWEA), the industry’s main trade group, supports both bills.
Introduction of the offshore wind tax credits bills coincides with larger efforts underway in Washington, D.C. to extend clean energy tax credits. Last week, a bipartisan group of lawmakers introduced legislation in the U.S. House of Representatives and Senate that would extend the 30 percent solar Investment Tax Credit (ITC) for five more years.
If renewable energy tax credit extensions are to pass in 2019, it’s most likely to come in a vote for a tax extenders package after Congress returns from its August recess. And with lawmakers and the White House having reached a deal to raise the debt ceiling and increase spending by $320 billion over the next two years, Congress may be more willing to take up tax credit extensions this year.
Two co-authors of the new Senate offshore tax credit bills, Tom Carper and Sheldon Whitehouse, sit on the Senate Finance Committee, the chamber’s powerful tax-writing committee, noted Nancy Sopko, co-director of the University of Delaware’s offshore wind initiative.
“That is the committee with jurisdiction in the Senate, and the committee in which the tax extenders bill would go through,” Sopko told Greentech Media.
With the window fast closing for project developers to claim existing federal wind energy tax incentives — projects must commence construction before the end of 2019 to be eligible for either the ITC or the Production Tax Credit — many offshore wind projects in the pipeline in the United States may miss out on federal support absent an extension.
A range of global energy developers are now active in the U.S. offshore wind market, including Denmark’s Ørsted, Norway’s Equinor and France’s EDF.
Building bipartisan congressional support
A tax extenders bill, which could be the vessel for a larger clean energy tax credits package, was approved by the House Ways and Means Committee in June. Political observers say lawmakers in both the House and the Senate appear interested in passing an extenders package this year, although the rancorous political climate and looming 2020 election make compromise more difficult.
Trade associations are mobilizing to persuade lawmakers in both chambers, including Republicans from coastal states with a heavy oil and gas industry presence, that offshore wind development means jobs.
Groups including the National Ocean Industries Association and the Offshore Marine Service Association — as well as AWEA — are “actively lobbying members of Congress, and especially on the Republican side, in making the case for offshore wind support,” said Sopko.
She added, “These very oil- and gas-specific trade associations are pushing their contacts in Congress, and their Republican representatives in Congress, to support offshore wind — not necessarily the ITC — but just to support offshore wind, because they see it as an expanded business opportunity for their membership.”
Central to those discussions are the synergies between the offshore oil and gas industry and offshore wind.
Gulf Island Fabrication built the foundations for Rhode Island’s Block Island offshore wind farm at its Houma, Louisiana shipyard. Other oil and gas companies are expected to play an important role in the future U.S. offshore wind supply chain.
Anthony Logan, senior analyst for North American wind power at Wood Mackenzie Power & Renewables, said an extension would help to keep offshore wind prices down for offtakers. But it’s probably not critical for maintaining support in East Coast states that have already embraced the technology. New York recently established a 9-gigawatt offshore wind target for 2035, and New Jersey has legislated a 3.5-gigawatt target for 2030.
“An extension still doesn’t allow for offshore build without state subsidies within our 10-year outlook, but it significantly limits those subsidies and by association the burden on ratepayers,” Logan said.
“I expect states, however, to continue buying if the [credit] is not extended, as their current procurement schemes have all been designed to assume the phaseout as it is,” he said.
An extension of the tax credit could have some unforeseen consequences on financing and power markets.
While an extension would accelerate the U.S. offshore wind build-out, it would also require more tax-equity investment. “The tax equity appetite for so many immediate credits is questionable; few firms have the necessary tax liability,” Logan said.
The extension could also impact power markets by bringing more capacity online in the 2020s than expected, potentially depressing electricity prices in certain markets, Logan said.
Source : greentechmedia
