Editor’s note: The comments in this article are edited for brevity and accuracy from the notes taken at the recent AWEA Offshore conference.
A panel at the recent AWEA Offshore 2014 Conference discussed the importance of the Investment Tax Credit (ITC) and what it means to the offshore wind industry. Panel chair Jim Reilly, a Senior Vice President for Federal Legislative Affairs, lead the discussion on federal tax policies with four other people. Panelists included:
Jeff Grybowski, CEO of Deepwater Wind
Andy Geissbuehler, Vice President and General Manager for Alstom Renewable Power.
Laura Haynes, a Senior Energy and Environment advisor for U.S. Senator Tom Carper, Delaware, and
Nancy Sopko, Ocean Advocate for Oceana.
Reilly acknowledged that the ITC is chiefly responsible for the offshore industry’s growth so far, and growth yet to come. His questioning aimed at uncovering some of the challenges that lay ahead in Congress related to the ITC, and then hear how conference attendees as an industry, as businesses, and as advocates make sure that the ITC is there when it is needed.
Jim Reilly: Jeff, a company such as Deepwater Wind has come so far and you see so much ahead. What does the ITC mean for you and what would it mean if it wasn’t available?
Jeff Grybowski: The Investment Tax Credit is certainly important for this first series of projects in the United States. As a U.S. industry, we suffer from a lack of infrastructure. For instance, we are at the early stages of supply chain development. Also, going through regulatory permitting processes for the first time has the impact of driving our costs higher than they otherwise would be for a more mature industry.
So, for this first series of projects, the ITC lets us close a gap of higher cost. We believe we have a number of solutions to bring down the higher initial costs, and most involve volume of projects, experience with projects, and developing the supply chain. For instance, the installation vessels, and the port infrastructure necessary largely do not exist, or not in the most efficient way.
These initial projects are carrying the costs of building the infrastructure and putting the supply chain together so that additional cost can be mitigated by the Investment Tax Credit, and mitigated in the sense that that additional cost isn’t passed along to ratepayers. So we can bring our eventual energy cost down to benefit the ratepayers.
In the long term, we will see our overall costs as an industry come down as we develop more projects. So I think the near-term investment by the Investment Tax Credit, will lead to a much larger cost reduction in the long term as this industry becomes more mature.
Jim Reiley: Andy, a previous video was a great reminder of the global nature of Alstom. But when we think about the ITC and its impact on U.S. businesses and U.S. sales, give us a sense of how a company like Alstom plans for the role of the ITC for its customers.
Andy Geissbuehler: It’s obvious that the impact of the ITC is substantial. As a global company, we have advantages in that we can balance activities. That means we can drive the learning curve in Europe and compile information which we can make available to the industry here. I think that gives us a little bit of a portfolio crutch.
But there are three reasons why the ITC is absolutely critical. The first is that we’re a technology company. We all know R&D is a long-term initiative and our customer needs are over a long period. You need to know how markets evolve. So long-term planning is a requirement, and ITC stabilizes the opportunity to plan long term.
The second reason is we’re a project company. Obviously, project execution is looking for predictability. Technical development is a long-term activity, also the industrial footprint needs some lead time to optimize its development so it serves the local communities.
The third and more important point: Offshore wind is not just another project. Offshore wind is a mission. It’s a tremendous challenge, extremely difficult, but extremely promising. It requires a concerted effort of all stakeholders, and I think we know how to serve many stakeholders who have made significant investments.
Industry leaders such as Deepwater Wind and Dominion Energy are taking the first steps to develop offshore wind. We have OEMs investing in this project. Also, we have the Department of Energy taking a strong leadership role to guide the whole industry and the nation in the right direction. But it seems there’s this one piece missing, and that is that we’re aligned at the same time. Not sequentially aligned. That will not serve our purpose. We must hit it all together to move forward. That’s why, to drive the mission, we badly need the ITC to provide predictability.
Jim Reilly: So, Laura, you’ve heard two company representatives talk about how important the ITC is to the future. You work for Senator Carper, a member of the senate finance committee and the representative of a coastal state. You’ve done a lot of work for offshore wind. Give us a sense of the outlook for the ITC and PTC during Congress’ lame duck session and maybe a little about what you see happening next year in regard to energy taxes.
Laura Haynes: Of course, any question dealing with Congress is not easy to answer. These days in Congress, things are even harder to decipher on how we’re going to move forward. Most people in this room understand that the ITC and PTC expired at the beginning of 2014. What you may not know is that there are actually 50 other tax credits that impact all sectors of our economy that also expired. These are credits that Republicans and Democrats alike support. After a full year of debate in Congress on tax reforms, full-on tax reform, it was obvious that Congress was not going to move forward on comprehensive tax reform. So there was a shift (in thinking) to look at these expired tax credits and see how we could extend them.
In April this year, the finance committee, which has jurisdiction over tax issues in the Senate, moved forward on a bipartisan bill that extended the tax credits, including the ITC and PTC, through 2015. The language includes important “commence construction” language, something that Senator Carper insisted we continue, especially for the ITC. It would be important for projects such as Alstom and Deepwater, projects that take long to construct, to have that commence construction language.
Passage was stuck in election politics, just like everything else that is in the Senate and the House these days. So it’s been put on hold until after the election, which is why we call it a lame duck session.
I believe that we will be taking up the extenders package with the ITC and PTC included, at least in the Senate, and I have all hope that it will pass. But elections matter. If there is a wave election like it could be, (Editor’s note: Haynes was speaking before the November 2014 election) you don’t know what will happen. And because the offshore wind industry is in its infancy, it does not have many constituents. If the Congress wants to scale down the package, there is a chance the ITC could be pulled. So it’s important that everyone in this room contacts their member of Congress to make sure that folks know that extending the language with “commence construction” is important to 2015, and making sure that the ITC is included, and that it is critical for your industry.
Start-and-stop tax credits are no way to build an industry, and avoiding that is something Senator Carper has been pushing – a better way we can deal with the credits. He has a bill called the Incentivizing Offshore Wind Power Act, which extends the ITC for the first 3,000 MW, which would help the first actors. There are better ways we could deal with the ITC. So it’s important for your companies to engage in tax reform, because that would be the place where we can make changes in how we deal with the tax credits today.
Jim Reilly: So, Nancy. What can we do? You’ve heard the importance of the ITC, you’ve heard some of the challenges. Oceana has been successful in advocating for positions in the past. What’s your advice to AWEA and the people in this room for what they can and should do to help move the PTC and the ITC forward?
Nancy Sopko: Just as Laura said, the PTC and the ITC are going to be under severe attack in the next couple of months, and even if we succeed in getting these critical tax credits into this extenders package, the future is still unclear in terms of a long-term extension of the ITC.
Members of Congress need to hear from those folks who are creating jobs in their districts and states. That means all of you developers, supply chain companies, in addition to the environmental groups that have been so vocal on this issue, you need to contact your representative in Congress. You need to get on the phone and make personal meetings with Senators, their staff, members of the House and their staff. It’s important.
I go to the Hill on a regular basis and talk to staff on both sides of the aisle, Republicans and Democrats, and I’ve tried to tell them the meaning of extending the Investment Tax Credit for the offshore wind industry. And I can speak ’til I’m blue in the face about jobs, but I work for an environmental organization. So it’s important that folks like Jeff and Andy come and talk to them personally about how they’re going to create jobs in their districts, and the promise of this new industry. Face time is incredibly important. We’ve had congressional briefings, lobby days, and fly-ins. You can do all of these things; Deepwater Wind, Alstom, and Cape Wind were all a part of a successfully lobby day and congressional briefing back in February that sought to raise a profile of offshore wind and the need to extend the Investment Tax Credit this year.
Laura and her boss are such strong and consistent advocates for this industry and the ITC, but again, it’s important for congressional staff and their bosses to hear from those who are directly affected by whether this tax credit lives or dies. If you can’t make it to Washington DC on a regular basis, emails and phone calls are just as important. The squeaky wheel gets the grease. We need to make sure that they don’t forget about this industry. It’s a little different than other energy industries in that there’s no steel in the water yet, so it’s a little easy to forget about when they’re not seeing it in front of them or off their shores every day. So we need to be those vocal advocates for the industry, make sure that they’re hearing from us on a regular basis, and that the lines of communication are open. Call them, email them, and let them know the status of your projects, let them know of the different developments going on in your companies.
As a former congressional staffer, I can assure you these folks have a lot on their plates. So if you’re not in their faces making sure they’re hearing about this industry and what we’re doing to help make this industry successful, they might forget. That’s critically important when it comes to an extenders package because the threat is there, that the PTC and ITC could be removed. It’s critically important when talking about tax reform and tax credits that provide long-term stability. So I would stress that face time is important, emails and phone calls are important, status updates are critically important, and grassroots work is very important.
I would urge you to insinuate yourselves in the communities where you (live and work), whether that would be town councils, state legislators, local stakeholders like Fisherman Wind or others. Get their buy-in for your projects, for your companies, what you’re trying to do for offshore wind, and then ask them to help advocate for you. Ask them to reach out to their representatives in congress, and urge them to promote policies that further offshore wind. With the dysfunction in Congress, to which Laura alluded, it is going to take a groundswell from the states and from congressional districts to make sure that these members of Congress have no choice but to get the ITC extended and included in a tax reform package.
So the bottom line is, whether you have the word “advocate” in your title or not, we are all advocates for the offshore wind industry. We all want it to succeed. We all want it to thrive. And we need to be louder. We need to be as loud as possible so they cannot ignore us.
Jim Reilly: I was thinking the other day about what else we could do. Then during a TV show, a car commercial came on and I saw wind turbines. I think we should find a way to partner with the American automobile industry to get them to help us.
You’ve heard today, again, the need, the challenge, and the opportunity to get the ITC extended so that next year, when we gather, not only is there steel in the ground and some steel in the water, but the promise remains bright going forward. I look forward to seeing you there. I just want to thank my panelists for helping us lay out the issues and provide some solutions.
Filed Under: Construction, Financing, News, Offshore wind