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The role of subsidies for wind energy has become a hot-button issue in the presidential campaign. Governor Romney opposes extending tax credits for the wind industry. President Obama has re-doubled his commitment to them. In a rare show of bipartisanship last week, the Senate Finance Committee voted to extend the credits for another year. The debate over their fate will likely surface again in the fall. Supporters of the extension argue all major sources of energy have received federal help. Opponents say it’s time to let the free market take over. Diane her guests discuss the politics the future of wind energy in the U.S.
- Coral Davenport Energy and environment correspondent for National Journal.
- Denise Bode Chief executive officer of the American Wind Energy Association.
- Daniel Simmons Director of regulatory and state affairs at the Institute for Energy Research.
- John Gimigliano Principal-in-charge of KPMG’s Energy Sustainability Tax practice and former senior tax counsel for the House Committee on Ways and Means.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. President Obama this week called on Congress to extend expiring tax credits for wind energy production. Rival Mitt Romney has said he opposes the tax credit for the wind industry, but many Republicans in Middle America support the credit. Joining me in the studio to talk about the politics and potential of wind energy: Coral Davenport with National Journal, Daniel Simmons with the Institute for Energy Research, Denise Bode of the American Wind Energy Association and John Gimigliano of KPMG.
MS. DIANE REHMThroughout the hour, I'll look forward to hearing your questions and comments on wind energy. Join us by phone at 800-433-8850. Send us email to email@example.com. Join us on Facebook or Twitter. Good morning and welcome to all of you.
MS. CORAL DAVENPORTGood morning. Good to be here.
MR. DANIEL SIMMONSGood morning.
MS. DENISE BODEGood morning.
MR. JOHN GIMIGLIANOGood morning as well.
REHMAnd, Coral Davenport, I'll start with you. Talk about why we're hearing so much more about wind energy now on the campaign trail.
DAVENPORTWell, earlier this month, the Romney campaign quite surprisingly told The Des Moines Register, the Iowa newspaper, that candidate Romney would support ending this tax credit for wind energy. That's in keeping broadly with a broad Republican position of ending subsidies for a lot of the -- a lot of renewable energy, the renewable energy industry. They're sort of at a position that the government should not be propping up these industries.
DAVENPORTIt was very surprising that we saw this happen in Iowa because wind energy tends to be an issue that is not Republican or Democratic. It's not partisan but regional. Wind energy is a significant part of the economy in a lot of these wind-swept rural Midwestern states, such as Iowa, Minnesota, Colorado, Wisconsin. Texas, actually, is -- has a big wind energy industry, Kansas as well. And so, as soon as the Romney campaign sort of came out and put themselves on the record on this, there was kind of an explosion in rural America.
DAVENPORTWe had a lot of Republican lawmakers saying, you know, we don't -- we do not agree with our candidate on this. You know, Iowa Sen. Chuck Grassley, a Republican, who wrote the original wind tax credit, was not happy about this. The Republican governor of Iowa was not happy about this. A lot of farmers, who tend to generally vote Republican, who make money on leasing their land to wind developers said they were very startled and unhappy about this as well.
DAVENPORTAnd it was interesting 'cause it opened up a real significant difference on this issue between the Romney and the Obama campaigns. And one that sort of seems to be opening up and getting a lot of traction.
REHMAnd as I understand it, Iowa has 7,000 people employed in the wind energy industry. Is that correct?
DAVENPORTIt has about 7,000 people employed in the wind energy industry. Also farmers there can make up to $6,000 a year leasing -- per wind turbine, leasing their property for wind energy. So I've talked to Iowa farmers, who say they kind of see this as an additional cash crop. So it's both the jobs and income in Iowa, which is, you know, an important swing state.
REHMAnd at the same time, did Gov. Romney -- what did he say about tax regs for the oil industry?
DAVENPORTGov. Romney's plan is pretty clear. If you look at it as economic plan, there's about $4 billion annually in tax breaks that go to the oil and gas industry. And as far as we can tell, those would not be rolled back, although there does seem to be -- I know that his -- one of Romney's energies -- energy advisers has indicated that maybe tax breaks for big oil might be rolled back, but not for independent oil.
DAVENPORTBut by and large, it looks like the Romney plan, certainly the Ryan budget plan, keeps all of those oil and gas tax breaks intact. So that opens up another avenue for attack from the Obama campaign.
REHMCoral Davenport of National Journal. To you, Denise Bode, how did these production tax credits help the wind energy industry? How much do they get?
BODEWell, the tax credit is an important incentive. It's really the only incentive at the national level that the wind industry has, and only the last five years have we had this tax incentive. It hasn't been allowed to expire. So in the last five years, we have attracted over $15 billion of private investment in America in wind, and it is scaled up. Now, because the piece parts are so large, the components, it has attracted manufacturing primarily from Europe to be established in the U.S.
BODESo we've gone from making 25 percent of our component parts for wind turbines in the U.S. five years ago to now over -- almost 70 percent of the component parts are made in America. That is 500 -- almost 500 manufacturing facilities in 43 states that have been scaled up in the last five years, just by having the tax incentive, which encourages the wind development in America.
REHMSo how much precisely is the industry getting in the way of tax credits?
BODEIt is two cents a kilowatt hour that is allowed the industry. And that is passed through to consumers in contracts. See, what happens is the producer of the wind who builds the wind farm contracts with the utility through a purchase power agreement. The purchase power agreement is a 20-, 25-year contract for that power. And so when that power is passed through to the consumer over a 20-year period, it is free fuel because the cost is really just the cost of building the wind farm.
BODESo it's like having a long-term mortgage, a 30-year mortgage that is certain. So it really adds and balances a whole portfolio of electricity.
REHMSo you're talking about what, $1.2 billion a year?
REHMFor how many years has that been in place?
BODEOnly for the last five years have we had it continuously. It was in place before. It was allowed to expire in place before, allowed to expire been -- in place before and only at a one or two years at a...
BODEAnd so we never were able to scale up until the last five years when it's been kept in place and not allowed to expire. And that's why you've seen wind adding 35 percent of all new generation in the last five years.
REHMDenise Bode, she is chief executive officer for the American Wind Energy Association. Daniel Simmons, talk about the role of wind energy in the total U.S. energy portfolio.
SIMMONSOK. Wind produces about 2.9 percent. In 2011, wind produced about 2.9 percent of all electricity generated. It'll be higher than that this year because of -- as Denise was talking about, installations have increased. And so wind is a growing part of our electricity portfolio. One of the challenges for wind however is what everyone understands about wind which is it only produces electricity when the wind is blowing. And that's not, unfortunately, how we use electricity. The way we use electricity is it's, you know, it's instant-on.
SIMMONSIt's, you know, you want some electricity in the middle of the night, but you want a lot more during the day on these hot summer days that we've had. When we have high demand, we're all using air conditioning. And at those times, wind isn't blowing as much. So that is the real challenge for wind, and that's something that the production tax credit really doesn't help with is developing the technology so that we could store the wind. Instead, what the production tax credit does is it pays the producers for producing.
SIMMONSAnd what matters is that we have some electricity all the time, and then that electricity can be scaled and increased to meet demand in the middle of the day. And wind -- for wind, that's a real challenge because -- yes, ma'am.
REHMSo from your perspective, should this tax credit continue?
SIMMONSNo. This -- we don't believe that this tax credit should continue, but, you know, we don't support tax credits for other energy sources either. I mean, it...
REHMWhat about oil?
SIMMONSThat oil doesn't need the tax incentives and, you know...
SIMMONSWell, any longer or period honestly because -- and -- now, it is also important to understand that the magnitudes are far different between what there is for per unit of energy from what wind does to what oil and gas does. In 2011, wind received, according to the Energy Information, in total federal subsidy is about $56 per kilowatt hour. But coal or natural gas received subsidies of about 54 cents. So you're talking about magnitudes, orders of magnitude different in the amount of subsidies for the amount of energy produced.
REHMI guess we also have to go back in time, don't we, in terms of development of oil energy, development of coal and the extent to which they received tax credits in order to develop and grow and become the strength within the economy that they currently are.
SIMMONSSomewhat, sure. I mean, one of the -- coal and oil production, especially oil production, but that even had a head start far ahead of -- you know, because we were first producing oil in the mid-1800s, 1860s when there was the first oil wells drilled and through the 1800s. And you didn't even have the internal revenue code like it is at all today until the early part of the century. So it had a head start when it was -- when there were no subsidies.
SIMMONSThere are some, but, you know, those should be done away with because, I mean, the sources of energy should compete on their own. And the people that should be deciding are, you know, us Americans. If you want to pay for wind energy, fantastic. You should pay for it. You should have that opportunity. And if you want to pay for other sources of energy that might be more expensive, you can do that, too.
REHMDaniel Simmons, he is director of regulatory and state affairs at the Institute for Energy Research. When we come back, we'll hear from another perspective and take your calls. Stay with us.
REHMAnd welcome back. You've heard from Coral Davenport of National Journal, Denise Bode of the American Wind Energy Association and Daniel Simmons of the Institute for Energy Research. Turning to you, John Gimigliano, let's talk about how many jobs wind energy actually produces for the U.S. economy.
GIMIGLIANOWell, Diane, I'd like to answer that question in two ways, if I could, to just think about that the importance and the magnitude of jobs. So I don't think there's any debate that the wind industry has created jobs in the United States. The U.S. has the second most installed wind capacity in the world, only behind China. Somebody's been building those wind farms. There are also equipment suppliers, wind turbine manufacturers, blade manufacturers, tower manufacturers here in the United States.
GIMIGLIANOSo there are clearly jobs being created. I think we can have a reasonable debate though about how many. It's pretty clear that this construction jobs are temporary. And so, should we or should we not count those? But there clearly are jobs. The harder question is, are they enough, or what is enough? Maybe the second aspect, though, is -- and I know there's been a lot of discussion around jobs, green jobs and otherwise. I just ask -- it's an interesting question, but is it the right question to ask?
GIMIGLIANOThe world that I live in, I represent investors who don't ask that question. They invest in renewable energy projects, and they ask a pretty simple straightforward question, which is, when I invest in these projects, do I get a decent return? Is it a safe return? And that's the question we ask in almost every other industry, the high tech industry, the banking industry. That's what investors ask. So the jobs question is an interesting -- although I wonder, is it really the right question that we should be asking?
REHMTell me, if you can, from an accounting point of view perhaps, how much tax credits mean to this industry.
GIMIGLIANOIn a word, a lot. They are important. There's no doubt about it. So for investors that look at these investments, they consider these investments on an after-tax basis. So what is my return on my investment on an after-tax basis? And that allows them to consider the value of these tax incentives. So I don't have much doubt that if the tax incentives were to go away, we would see a significant reduction in investment in the wind industry.
REHMAnd why is that? Is it because somehow those tax credits represent sort of, theologically, if you will, the government support, the government's understanding of how important this industry is?
GIMIGLIANOWell, when the production tax credit for wind was first enacted back in 1992, I think it was recognized then. And as it -- really still is -- as a mechanism for the federal government to bridge the gap between established technologies, oil and gas, for example, and new technologies like wind and many others that are included within the PTC. So you might ask the reasonable question. Well, gosh, 1992 was a long time ago. Why are we still having this discussion?
GIMIGLIANOWell, the problem is, if from a wind energy perspective, look what's happened to the price of natural gas in that period of time. That's who wind competes against. The natural gas prices are at near historic lows, and so it has been challenging for the wind industry to compete without the tax credits largely because of that. Whether or not we think gas prices will stay this low forever, well, lots of people will debate on that. And, again, reasonable minds can differ.
REHMDenise, in your mind, why do we still continue to need these tax credits?
BODEWell, I think that John made a really good point, you know? Although it's been in place for a period of time, until -- as I said earlier, only the last five years have we had it continuously, and no industry can really scale up with having had some certainty. And one of the reasons now that the price of wind is coming down over the last five years is because we have in-sourced those 500 manufacturing facilities, which has brought down the cost of wind in America. And so we are not going to need it forever.
BODEWe're rapidly scaling up, reducing the cost of wind so that it will be competitive without the tax credit. But I think everyone here would agree that you don't get people a cliff, that you give them a glide path to get off, which is what every other industry has had. You know, even the Section 29 tax credit for the oil and gas industry that helped them develop the gas shale technology over the -- was a 20-year credit that they were given a glide path.
BODEThey knew when they had to scale out of it, and that helped develop this gas shale revolution. So in America, that's critically important. And if I could add just one other thing to respond to the question about jobs, which I do think is a valid question because we talk about jobs in every of -- all of the energy sectors. We have 75,000 jobs, and in the last five years, one of the key things that's happened is, yes, you have the development side jobs at being inflowing in terms of total jobs.
BODEWhat has happened, though, with the 500 manufacturing facilities is we've actually increased the number of manufacturing jobs in America to 30,000 operating that are long-term manufacturing high-tech jobs in America. And we're one of the fastest growing manufacturing sectors.
DAVENPORTWell, one thing that, I think, is interesting about the jobs debate, obviously, jobs are sort of the central argument and debate in this presidential election. The economy is the biggest issue, employment, unemployment, and I have found it fascinating that both candidates, both parties have framed their energy positions, framed their energy platforms as job creators. We see the Romney campaign being asked about what are you going to do to create jobs.
DAVENPORTAnd one of the first things that they will say is, we will increase drilling, we will increase fossil fuel production. This will be a driver of jobs. And, of course, we've been hearing from the Obama campaign since 2008, you know, these policies, to grow renewable energy, will be job creators. If you actually look at the numbers, there are merits to both sides of the energy debate, to increasing fossil fuel energy or cutting fossil fuel emissions or growing renewable energy.
DAVENPORTOn both sides, the energy industry actually isn't a major employer. I was just looking -- the Bureau of Labor Statistics shows that in July, the oil, gas and coal mining industry employed 790,000 people. It says that overall, the renewable energy industry employs about 3 million people. In the United States, there are about 155 million jobs overall. Those are tiny, tiny sectors of the overall U.S. economy. Energy development is important, and there are reasons to talk about different kinds of energy development.
DAVENPORTBut, you know, I talked to a lot economists, who say it's sort of false, both sides framing their energy policies as job creators. You know, those are not going to be the kinds of polices. There are many arguments to be made about what kind of energy we should have, but those are not going to be the kinds of policies that are going to move the needle in a major way to solve the country's unemployment or economic problems.
REHMBut let me go back to this question of tax credits and how Gov. Romney justifies no extension of tax credits for wind while the Ryan plan continues the tax credit for oil and gas.
DAVENPORTYou know, I think that in doing that, the Romney campaign is opening themselves up to a clear line of attack and one -- a clear political line of attack and one that Democrats have been using for a long time.
DAVENPORTIf you're going -- especially now with the addition of Paul Ryan to the ticket, if you're going to have someone who is campaigning as fiscal hawk, as a budget hawk, as, you know, cutting subsidies all the way around, you know, cutting government handholding, it's going to be very, very difficult politically to justify cutting this $1.2 billion annual subsidy for one energy industry while keeping this $4 billion annual energy subsidy for another industry.
DAVENPORTAnd when I talk to folks on the Hill, they say, you know, in the next year or so, we're going to see a big debate about budget and tax reform. And at the end of the day, it's going to be much, much, much more difficult for the oil and gas industry to continue to justify holding on to a lot of those existing tax credits that they have. It just becomes a harder and harder case politically to defend.
REHMDaniel Simmons, how do you see that?
SIMMONSWell, a couple of things. First of all, on the jobs issue, since 2003, about 20 percent of all new private sector jobs were in the oil and gas industry according to an article on The Wall Street Journal. So that industry has grown because of new technologies. That's why we have more oil production, more natural gas production. And, I mean, this has been in a tough economic environment.
SIMMONSSo we have seen -- so there has been job increases. And one of the things to understand, too, about the production tax credit is that its 2.2 cents per kilowatt hour produced when the price of electricity, the wholesale price of electricity, is around frequently about 4 cents a kilowatt hour. In other words, this is a tax credit that's worth, you know, 40 to 50 percent of the cost of the electricity. In other words, we're not going out.
SIMMONSLike, when we're talking about the, you know, some incentives, some tax incentives for oil and gas, we're not giving them $40 a barrel in tax credits. It's pennies on the dollar, and I -- you know, I don't support those either. But what I'm saying is this is a very large amount of the wholesale price of electricity that we're giving the electricity sector, so...
GIMIGLIANOWell, I mean, you know, first of all, you're talking about wholesale prices. I certainly would like to see that pricing on my electric bill at home. So, you know, it's a little bit of apples and oranges. And just back to the politics, I know that's an interesting thing to talk about. And reading the political tea leaves of what Gov. Romney's proposed versus President Obama's proposed -- just to bring it back to reality, though, of course, the way, you know, participants in the sector, the market think about it -- just -- this is really a House and Senate play.
GIMIGLIANOThe extension of the production tax credit is either -- you know, would a President Romney, if President Romney wins this fall, would he veto an extension of the production tax credit? Not likely. It's almost certainly going to be bundled with, you know, countless other provisions, and it's highly unlikely he would veto it over that. So it's an interesting conversation to have.
GIMIGLIANOBut keep in mind -- and I think, you know, we all should -- that this really is a House and Senate play. And it's a question of would -- will the House ultimately extend this? And I think there's a long history of them actually having extended the PTC over and over and over.
REHMDenise Bode, tell me who finances your organization.
BODEIn what way? I'm sorry. Can you...
REHMWhere do your finances come from?
BODEOh. Who are members of the…
BODEOh, OK. We have developers of wind, which are wind developers. Our largest developer of wind in the United States is NextEra Energy, which is a Florida-based company, owned by Florida Power & Light. Our -- we're financed by manufacturers. As I said, manufacturing sector has grown dramatically, so we have a huge number of manufacturers that support us. The largest manufacturer of wind in the United States is General Electric.
BODEWe have transportation companies, railroads, trucking investors. We're sort of soup to nuts. We represent the smallest bolt manufacturer to the various large developer and manufacturer. So we have everyone. We have approximately 2,000 business members, and that represents probably, in terms of individual employees, close to 20,000.
REHMDenise Bode, she's chief executive officer for the American Wind Energy Association. And you're listening to "The Diane Rehm Show." Daniel Simmons, do I understand correctly that the Institute for Energy Research, which you represent, has come out against these tax credits not only for the wind energy project, but I gather you're against tax incentives for any oil and gas as well. Is that correct?
SIMMONSWe are against subsidies for any forms of energy. That is the simplest way to put it, and that is what we have come out against in multiple letters that we've sent to Capitol Hill, for example.
REHMAnd yet, as I understand it, you have some funding from the Koch brothers. You have some funding from oil and gas producers. Is that correct?
SIMMONSThe -- we receive our funding from individuals, from foundations and from some energy companies. We don't disclose our donors. Some of our donors...
SIMMONSGood question. That's not my -- I've -- that's a question that I've never asked. It is -- but it's one that I don't know the answer to.
REHMIf I worked for an organization and represented them, I would certainly want my own integrity protected by virtue of knowing for whom I was working.
SIMMONSAnd that is definitely protected because we don't work for any of the people that give us money. We are not a trade association like the American Wind Energy Alliance. We are -- we support free markets, and people give us money because we support free markets, because we don't support subsidies, because we want Americans to decide for themselves which energy choices make the most sense for them.
REHMBut if the oil industry is giving you money and they are in competition with wind energy, isn't there kind of a conflicted interest there?
SIMMONSWell, actually, there, there is no conflict of interest, and the reason is because wind doesn't -- or petroleum -- only seven-tenths of 1 percent of the electricity in this country is generated from petroleum, so there's no real -- there's no conflict between oil and between wind. They are in completely different markets.
SIMMONSYou know, petroleum is in the transportation sector. I mean, of the vast amount -- almost all of the petroleum that we use is in the transportation sector while wind produces electricity, and so they are different markets. So they don't -- so they're not competing against each other.
DAVENPORTAnd that's absolutely true, although I would say that if you're getting funding from natural gas, natural gas is the direct competitor with wind, their biggest competitor right now at the moment, natural gas, since natural does supply electricity.
SIMMONSNo, that's true. And for these reasons, I, you know, I don't ask the -- who our donors are because, one, I don't care. What matters to me is that I support policies that are free market policies regardless of who is supporting us for that reason because, you know, the -- my entire career has -- I've worked for organizations that, you know, that support free markets, that promote free markets. And...
REHMBut is the gas industry continuing to get subsidies?
SIMMONSThere is -- they receive some tax incentives. How much -- you know, how you want to define the subsidies, I don't know the -- I don't have a good answer for you on that.
DAVENPORTI know that the $4 billion in -- roughly in subsidies that go annually to the oil and gas industry, it's kind of hard sometimes to pull that out between which is going to oil and which is going to gas because in a lot of times it's the same companies.
DAVENPORTIf you are Exxon Mobil or Constellation and you are fracking a well or drilling an offshore well, you might not always be -- you might be receiving a federal tax incentive from the government, you know, to help offset some of those costs. But you might not know if you're going to ultimately discover oil or natural gas. So, in some cases, it's -- it will be the same companies.
REHMCoral Davenport of National Journal magazine. We'll take a short break here. When we come back, your calls.
REHMAnd it's time to open the phones, 800-433-8850. First to Sutton, N.H. Good morning, Joanna. You're on the air.
JOANNAOh, hi. Thank you very much for taking my call...
JOANNA...and I'm really enjoying the program.
JOANNAI just have a couple of comments, and I'll make them real quick. First of all, I feel like if I had a choice, I would prefer my energy coming from a source that's not as harmful to the environment. And I think that I'm not a proponent of the oil industry because I don't feel that their practices are safe for the environment. So that's just my personal comment. Second, in the beginning of the show, you made a comment about how the wind industry, how Romney would like it kind of open -- a free-market system and not get any assistance from the government.
JOANNAAnd I feel that if that's his stance, then it should be fair for all different sources of energy, including the oil industry. So they should not get any help from -- or get tax breaks from the government. If he's going to make that stance, it should be an equal thing for all types of energy sources.
DAVENPORTWell, you know, the caller mentioned something that, again, the Romney campaign is opening themselves up absolutely to this line of attack, and it's kind of why we were surprised to see them come out so clearly and firmly against the wind tax credit, especially in a campaign where they've tended to be sort of vague and opaque about a lot of policy specifics that's been difficult to get real specifics out of them.
DAVENPORTAnd then here we have these two sets of specifics side by side. It becomes harder and harder on the campaign trail to justify this, and it becomes something that voters have questions about and certainly that the campaigns are preparing to exploit.
REHMJohn, what is the rest of the world doing as far as wind energy and tax subsidies are concerned?
GIMIGLIANOThat's an interesting question, Diane. I assume that the rest of the world had tax subsidies for the development of wind energy as well. What I came to conclude is the answer is they don't. They use other mechanisms, things like feed-in tariffs that are more or less guaranteed pricing for electricity that aren't based on the tax code. The U.S., really, is almost unique in the world in using the tax code to drive investment.
REHMInteresting. All right. And to Fairhaven, Mass. Good morning, Dawn.
DAWNHi. How are you? Thank you for taking my call.
DAWNSorry. I'm a little emotional about this. I absolutely am against PTC credits, and I'll tell you why. The human element is not being addressed here. I have two -- we have two industrial-sized turbines less than 800 feet from neighborhoods. People are sick. I have friends that I've met while I've been fighting these, and they're not in my backyard. I have friends that have not suffered from post-traumatic stress syndrome for years, and since these have been in their backyards, he's now attempted suicide.
DAWNI have another woman that has attempted suicide because she can't live with this anymore. She's -- I know people that have abandoned their homes. So the problem with these is it gives the wind industry (unintelligible) to set these -- site these things anywhere they want to. We don't have the proper sitings for these. I believe there is a place for wind, but it's not in people -- it's not in neighborhoods. People are getting sick, and it's killing wildlife. And nobody seems to care anything about this.
REHMAll right. Thanks for your call. Denise, that's a very, very emotional kind of statement, these wind turbines placed certainly in some neighborhoods that are creating problems.
BODEWell, I really feel a great deal of sympathy for this woman, but I think what I would have to say is that the wind industry takes pride in very carefully siting and studying where we put our wind turbines. We've had tremendous technology advances to place turbines in areas that avoid any kind of wildlife impacts. And, in fact, a wind turbine and wind farms in general have less impact on bird communities than just having a building or having, you know, your neighborhood cat.
BODESo, you know, it's really something that I think that, you know, obviously this lady has a real issue with a particular wind farm. I'm not sure which one she's talking about, but I think one of the things you have to remember is that I think this industry has had a tremendous ethic about where you place wind farms and how you do it. There's been tremendous amount of studies. In Massachusetts, they recently did a study to talk about the impact of wind turbines and found that it did not have a health impact, you know?
BODESo there's plenty of evidence that demonstrate that the impact is minimal. And one of the positive things you have to realize is that because of wind being added, it avoids tremendous other health impacts that would be.
REHMAll right. Coral Davenport, what have we heard from individuals and neighborhoods and issues about human impact, issues about wildlife, issues about, I mean, Dawn goes so far as to say post-traumatic stress syndrome.
DAVENPORTOne of the biggest issues when it comes to wind energy and renewable energy in general, we talked -- I talked earlier about, you know, it's very popular in these wind-swept, Midwestern, rural states, Iowa, Kansas...
REHMWhere there's lots of land.
DAVENPORTLots and lots of land. But one of the biggest and most difficult political issues about wind energy is if you start siting these wind producers there, you also need to site a lot of transmission, typically the way that a lot of big-- major, major power lines. Typically, the way that you would build an electricity generator, you would build a coal or gas plant next to a population center. You'd have a city, you'd put the coal or gas plant next to it, put a wire down, there you go.
DAVENPORTIf you've got these huge wind farms kind of in the middle of nowhere, then you need to put down a lot of transmission to get that electricity to population centers. And this has been a major political issue in terms of how do we -- how do you move that electricity? How do you develop this as an electricity source? There's been a debate about, should the federal government go in and do eminent domain, you know, seizing land, seizing property and putting in these major transmission lines?
DAVENPORTObviously, that's the kind of thing that's going to get communities very upset. So as this new source of electricity and this new source of power continues to grow and develop, there's -- there are a lot of -- there a lot more fights along the way, you know...
REHMNot just over tax credits, Daniel Simmons.
SIMMONSOne of the important things to remember here is that, you know, there are impacts from wind just like there are impacts from many other source of energy.
SIMMONSAnd, you know, it's important to consider those impacts and figure out how we can minimize them in every, you know, whether it's wind, whether it's hydraulic fracturing and natural gas that, you know, we -- people do see when there is change. People, you know, we do have new impacts, and it's important to examine those impacts and see what we can do to minimize them going forward.
REHMDawn, before you hang up, let me ask you exactly where the wind turbine you're talking about is located.
DAWNWe have two industrial-sized wind turbines in Fairhaven, Mass. The other people in Falmouth, Mass. have the wind turbines that we were supposed to get in 2007, and we fought. We are just now -- they've just go on online. We are just now feeling the impact. And I have to go back to the point where they say the wind industry does all these studies. The problem is the study that was done in Massachusetts did not take into account infrasound.
DAWNThey completely ignore infrasound, and a lot of the problems that are happening in these homes are due to infrasound. So you can't say that the study, oh, we did the sound study, and we did an audible study, and we don't think it's going to bother people. Well, you have to look at the whole picture.
REHMAll right. Denise Bode.
BODEWell, you know, the state government in Massachusetts did the analysis and did the study, and so I have to trust that they were taking into consideration what all the areas and all the issues that impact sound and impact community. So I can't really answer on, you know, the specifics of the study on infrasound. I'm not sure what it is, so I would have to depend on what the state of Massachusetts came up with.
REHMCoral, how are these studies conducted before these wind turbines are placed?
DAVENPORTThere are actually are a great deal of studies being done. I know, you know, they've been studying for years and years and years as they've tried to build wind turbines off the coast of Massachusetts, assuming that there's a big political debate about. So, you know, this...
REHMAnd Ted Kennedy was very involved in that.
DAVENPORTAnd he was very strongly opposed...
DAVENPORT...to the wind turbines off the coast. I know they -- in that particular case, they did a multi-year study on birds, how it affects birds and wildlife. They'll do visual studies to see just what it will look like, how it'll affect the tides, how it'll affect the fishing, how it affects, you know, the impact it has on fishing and commerce. There are many, many, many levels of studies conducted at the state and local and EPA level. And, I mean...
REHMWhat is this infrasound that Dawn...
DAVENPORTI have never heard of that. I don't even know what that is.
REHMAnd I gather somebody is going to inform us of precisely what that is. I wonder whether there's an internal sound that occurs within a home if a turbine is nearby. Let's go to Syracuse, N.Y. Brian, you're on the air.
BRIANHello. Can you hear me?
REHMCertainly can, sir. Go right ahead.
BRIANSure. My background is in environmental consulting, and I actually now teach at a local community college. And, you know, my basis for calling you guys up is, I don't think tax credit is the real issue. And I think you just started touching on the real issue here, which is actually have to do with power lines and infrastructure because most of the turbines that are going in Upstate New York really have to do with, actually, power line location and have very little to do with actually the best location for setting these turbines up.
BRIANSo, you know, in terms of generating electricity, so I would actually encourage you to follow up with more questions on, you know, what it would take actually -- how the federal government -- the state government help us build more infrastructure for these power -- for these new power structures, whether they are wind power or solar or other alternative.
REHMAll right. Sir, thanks for calling. John.
GIMIGLIANOWell, I think that's right. You know, it's a very relevant point, that the cost of building the wind farm itself, that's one issue. How do we finance the tax credits, et cetera is an interesting issue.
GIMIGLIANOBut when you think about the infrastructure cost of building power lines from the so-called square states that are windy out to where the people are, that's a massive investment. In fact, siting the wind farm itself has proven to be much easier than siting the transmission, which has been very, very difficult, with no real solution on the horizon. Do the states control it? Do the Feds control it? That's going to be a difficult issue.
REHMAnd you're listening to "The Diane Rehm Show." Daniel.
SIMMONSAnd what's impressive about the United States is that we are -- as John mentioned earlier, we have the second largest installed wind capacity in the world. But we're actually the world's largest wind producer because, so far, we've had good transmission to get the -- to get that electricity to market. And in the future, we're going to have more and more wind capacity because in 29 states, there is a mandate -- there is a renewable electricity mandate. So we're going to have more and more wind.
SIMMONSThese issues are going to become bigger, bigger as we have more and more transmission to serve us all those new turbines that will happen regardless of whether there's a production tax credit.
REHMI knew we'd get an answer on infrasound. It comes from Mary, who says, "I assumed this is correct. Infrasound is sound that's lower in frequency than 20 hertz or cycles per second, the normal limit of human hearing. Hearing becomes gradually less sensitive as frequency decreases. So for humans to perceive infrasound, the sound pressure must be sufficiently high." So clearly, some kind of impact going on within those spots. Let's go now to Kim in Boss, Mo. Good morning. You're on the air.
KIMGood morning, Diane. This is a very important show. Thank you so much.
KIMI wanted to talk about the tax and jobs issue...
KIMFrom the time of the assembly line, then we had robotics and mechanization in the factories, and then we had electronics. And now we have cyberspace. And especially with cyberspace, the dreams of the jobs that that would provide were outsourced. But yet it's using all the energy, is using the public trust, the land, the beaches, the air, the water, and yet so we've not been considered in this. And the profits are just going to individuals, and the public trust is ruined. And the people are paying for it with their taxes.
KIMSo I think that -- at -- the issues that need to be address as far as jobs is the fact that these technologies, through the last 100 years, have significantly decreased, decreased, decreased, and we have been in denial every time, saying what are we going to do now for Americans?
BODEI think that's a very good point. One of the things that is unique about the wind industry manufacturing is that because the component parts are so large and so many, that most manufacturers like to build manufacturing facilities close to where the wind farms are. So it is one of the unique opportunities for America to build a brand-new manufacturing sector in America that cannot be outsourced without dramatically increasing the cost of those component parts.
REHMJohn Gimigliano, what happens if these tax credits do not come through?
GIMIGLIANOWell, I think it's almost certain that some projects that would have otherwise been built -- and we could debate about how many -- but certainly, some projects that would have otherwise been built -- wind projects will not be constructed. And that capital that would have gone there will find another home. Whether it's in natural gas projects, whether it's in China, we don't know, but that will be the effect of not ascending the tax credit.
REHMI've seen graphs that indicate that with tax credits, employment and jobs go up, without those tax credits, that employment goes down, correct?
GIMIGLIANOWell, that goes back to the question, I think, you asked at the outset, which is, does this create jobs? And I think we can all agree it creates some, just a question of how many.
REHMJohn Gimigliano, he's principal-in-charge of KPMG's Energy Sustainability Tax practice. He's former senior tax counsel for the House Committee on Ways and Means. Denise Bode of the American Wind Energy Association, Daniel Simmons of Institute for Energy Research, Coral Davenport of National Journal. Thank you, all.
REHMAnd thanks for listening. I'm Diane Rehm.
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