Debate Over Green Energy Subsidies Intensifies in Wake of Vestas Closures

November 2, 2012

Despite receiving an estimated $34 million in state and local tax credits and rebates, Vestas has struggled

DENVER–The debate over government subsidies for wind energy intensified Thursday after Vestas Wind Systems announced it would close is three U.S. research-and-development offices, including one in Louisville.

The embattled Danish wind-turbine manufacturer said in a statement that the shutdown was designed to “further simplify its global footprint to reduce operational costs.”

“Vestas has adopted a flexible business strategy during a period of changing market dynamics in the wind industry,” said the company statement. “Vestas will continue to scale up or down depending on business needs and market demands.

Lately Vestas has done more scaling down than up. The shutdown came as the latest of several Colorado job cuts that have reduced the firm’s workforce at its four state plants from more than 1,700 to about 1,200 since January, according to the Denver Business Journal.

Vestas has been at the center of the debate over the viability of wind energy since the company was lured to Colorado with tax credits and breaks by Democratic Gov. Bill Ritter. In 2004, Colorado voters approved Amendment 37, which includes a renewable-energy mandate that rises to 30 percent in 2020.

But Vestas has struggled despite receiving an estimated $34 million in state and local tax credits and rebates. The company has cited the drop in orders for wind turbines as a result of the looming expiration of the federal wind production tax credit (PTC).

Advocates of renewable energy blamed the company’s woes on the lack of government support. Colorado Sen. Mark Udall, a Democrat, sent out a tweet Thursday saying, “Sad news: @Vestas #Louisville facility is closing because Congress didn’t act quickly to extend the wind #PTC.”

“What you’re seeing is a pipeline of projects drying up because orders are dropping off, because they’re not sure what’s going to happen,” said Sarah Propst, executive director of Interwest Energy Alliance, a renewable-energy advocacy group. “That’s a huge factor–PTC uncertainty is directly related to orders.”

The PTC expiration has struck a nerve in the presidential race, with President Obama advocating its renewal and Republican nominee Mitt Romney saying it should be allowed to expire.

The wind industry “is heavily dependent on subsidies, and if they’re not there, the market’s not there,” said Denver lawyer Kent Holsinger, whose firm has challenged the renewable-energy mandate.

Most Republicans side with Romney, saying the PTC gives an unfair advantage to an energy industry that cannot survive on its own. At the same time, six of the seven members of the Colorado congressional delegation have called for renewing the PTC, including three Republicans.

The League of Conservation Voters Victory Fund is running an anti-Romney ad in Colorado citing the expiration of the wind tax credit as a potential job-killer.

“I got laid off because Mitt Romney and his friends in Congress want to eliminate tax credits for the wind industry,” says Chris Maese of Pueblo in the ad. “I think Mitt Romney is not in touch with the little guy.”

This week’s announced closure is expected to result in a loss of 60 jobs, for a total of 85 jobs at Vestas’ three R&D facilities. The other two offices are located in Houston and Marlborough, Mass.

Amy Oliver Cooke, energy policy center director at the Independence Institute, said that there’s been a global trend away from government subsidies for wind power, thanks in part to the austerity measures being enacted in Europe.

“There’s a cutting back globally of subsidies for renewable energy because it’s not efficient it’s certainly not economical,” said Cooke.

She said Vestas’ decision to shut down offices and lay off workers may indicate that the company isn’t optimistic about the PTC’s post-election chances.

“I would think they don’t anticipate the PTC being extended or at least not extended for the long term,” said Cooke. “We’ll see what happens come Nov. 7.”

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