Congress has historically preferred to implement energy policy through a series of tax incentives rather than mandates. Although the efficacy of those different approaches are subject to debate, it is clear that the lack of a consistent energy policy hinders private investment, causes the loss of American jobs, and stymies business growth in the sector. Further, it is essential for Congress to provide certainty about the long-term availability of an incentive. One such tax policy that demonstrates the impact of uncertainty is the Production Tax Credit (PTC).
This tax credit has been wildly successful, helping to fuel 400 wind manufacturing facilities in 43 states and twelve-fold growth in domestic manufacturing of wind turbine components in the past six years alone. However, the credit could expire this year for the fourth time in two decades.
This uncertainty has put off investors and led to boom-and-bust cycles in the industry: Wind installations have declined by 73 to 93 percent in years without a PTC. Because of the long timelines (wind projects can take 9 to 16 months from groundbreaking to power generation), investors seeking new wind projects must look two to three years into the future to decide whether the costs and benefits warrant investment. As we've seen in the past, investors are wary of supporting new projects if the availability of the tax credit is uncertain. With the PTC's future once again in doubt, factories are already seeing a sharp decline in new orders for 2013 -- when the credit will have expired -- and layoffs have begun.
Transparency, longevity, and consistency -- TLC -- are critical signals to investors and essential factors to increase American jobs, support businesses, and create renewable power.
While we dither, other countries are moving ahead, providing strong policy signals and incentivizing the growth of the clean energy sector in their countries. Even oil-rich Saudi Arabia understands the opportunity and has announced its intention to become the "kingdom of sustainable energy." It also has set an ambitious renewable-energy goal.
As a result of our indecision, America could again lose its leadership position in a sector that we helped invent, innovate, and engineer. Why turn our back on a slice of the global economy that has experienced growth of 600 percent (excluding R&D) since 2004?
Congress should act now to extend the PTC rather than wait for an already over-packed lame-duck session after the 2012 election or a new legislative session in 2013. It would hardly be controversial. The PTC enjoys widespread, bipartisan support from groups as diverse as the National Governors Association, the National Association of Manufacturers, the American Farm Bureau Federation, environmentalists, labor unions, and others. Members of the House and Senate have indicated their agreement that the PTC should be renewed.
Intermittent policies hurt the ability of the United States to consistently compete and turn clean energy innovation into manufacturing, deployment, and export opportunities. Congress should act now -- not wait -- to provide investors with the assurance that they need to fuel American investment, job, and business growth and to assure our global leadership in a rapidly emerging new sector.