Wind, biodiesel subsidies promoted

Source: Phil Brasher • Posted: Wednesday, December 14, 2011

WASHINGTON — With subsidies for corn ethanol set to disappear at the end of the month, the rest of the renewable-energy industry is lobbying lawmakers to keep government incentives going.

The $1-a-gallon tax credit that undergirds the production of biodiesel also is due to expire Dec. 31, while tax incentives that support wind power and advanced forms of ethanol made from nonfood feedstocks are due to end a year from now.

The industries hope that Congress will include extensions of those subsidies in legislation that is needed to continue a variety of popular tax breaks that are expiring, including one that protects middle-income taxpayers from paying higher taxes under the alternative minimum tax.

All incentives for renewable energy are facing tougher opposition in Congress, especially among Republicans. The GOP-controlled House hasn’t voted specifically on the renewable-energy subsidies. But in a sign of how the politics of renewable energy have changed, the House voted overwhelmingly earlier this year to block an increase in the amount of ethanol that can be added to gasoline.

“It’s very difficult for me to predict as easily now as it was two years ago” what will happen to the subsidies, said Sen. Chuck Grassley, R-Ia.

The ethanol industry has been resigned to losing its 45-cent-per-gallon tax credit on Dec. 31 after losing a key test vote this spring when the Democratic-controlled Senate voted heavily to abolish the subsidy.

Ethanol producers say their industry is mature enough to live without the subsidy, but officials with the other renewable-energy producers say their industries are too fragile.

“Stable, sound federal biodiesel policy creates and maintains green-collar jobs,” said Alicia Clancy, a spokeswoman for Ames-based Renewable Energy Group Inc., one of the nation’s largest biodiesel producers.

The biodiesel industry is in much better shape than it was in 2010 when the subsidy lapsed for the entire year because Congress could not agree on a tax bill. A federal mandate on refiners to use biodiesel has since taken effect, and production has soared to record levels as a result. The industry is expected to produce about a billion gallons this year, more than triple the amount produced in 2010.

“We don’t think the industry is going to fall back to the levels it did in 2010 if this tax credit expires, but what we do think is that it’s going to get in the way of a lot of momentum,” said Ben Evans, a spokesman for the National Biodiesel Board.

The wind and advanced-ethanol industries say they need an early extension of their tax credits to assure investors that the subsidies are going to continue. The American Wind Energy Association claims jobs in the wind industry would be cut in half if its tax credit disappeared.

Iowa is the nation’s second-leading producer of wind power, with 3,675 megawatts of capacity, and has more manufacturing for the industry than any other state, the association said. About 60 percent of wind turbines are now produced domestically.

“Now that we’re building the majority of wind turbines domestically the (potential) manufacturing job loss is extremely important,” said Rob Gramlich, vice president of public policy for the association.

The Advanced Ethanol Council, a group of companies that are trying to commercialize new forms of ethanol made from crop residue, wood and other feedstocks, is lobbying to get an extension of both its $1.01-per-gallon tax credit and a special depreciation allowance for production facilities.

“The mere prospect” that the subsidy and depreciation allowance would expire “will start to affect projects that take 18 months to build, and could drive our industry into a series of ‘fits and starts’ that has dampened investment in other domestic clean energy sectors for decades,” the Advanced Ethanol Council said in a recent letter to the congressional tax-writing committees.

The companies have struggled to attract investment and perfect technology necessary to make the biofuel economically. The government estimates that only a few million gallons of advanced ethanol will be produced in 2012

The corn ethanol industry, by comparison, is expected to produce a record 14.5 billion gallons this year.