The wind industry is reaching the point where it no longer needs the production tax credit (PTC) to survive, according to David Malkin, director of government affairs and policy for GE Energy Management.
“In some parts of the country on a levelized-cost-of-energy basis, wind is at par with combined-cycle gas turbines without the PTC,” Malkin told Greentech Media today at Forum 20/20.
Wind has already caught up to natural gas in areas of the Midwest, where the resources are most plentiful, he said. Wind production costs are also declining overall due to technological advances made by GE and other turbine manufacturers. According to the most recent DOE analysis, average wind power contracts currently sit at 2.5 cents per kilowatt-hour, an “all-time low.”
Wind will become even more competitive as natural gas prices rise. “I think as gas prices start to stabilize around the $4 to $5 per MMBtu range (up from $2 to $3 per MMBtu), that helps the economics of wind,” said Malkin.
In light of declining costs for wind technology and leveling natural gas prices, GE supports “a measured phase-out of the PTC,” he said.
However, he warned that industry negotiations that run up against an expiration deadline are damaging to the industry, assuming Congress takes up the issue.
“If Congress does nothing, the next year for the wind industry is going to be tough,” said Malkin.
GE is pushing for Congress to extend the PTC through 2015 and then begin negotiations for a three- to five-year phase-out, he said. “We need a little bit of a cushion. We need Congress to extend the PTC ideally for 2015 to buy us time to then implement that measured phase-out.”
Master limited partnerships (MLPs) and broader tax reform could make for a smoother transition, but they are not the wind industry’s top priority.
“I think there is room for those to be part of the solution, but I think the elephant in the room is the PTC, just because that’s so significant and has been such an important part of the industry. I think that needs to be addressed one way or the other, and then we can look at MLPs and other potential solutions.”
Whatever the policy outcome, Malkin was confident the wind industry would be able to cope — but with varying degrees of pain.
“I think the industry will adapt,” he said. “I don’t think the industry will have a choice.”
Source: Greentech Media. Reproduced with permission.
