US: Big oil wins from wind PTC extension

Sometimes you just have to take the deal on the table.

Now, don’t get us wrong. The five-year extension of the US wind production tax credit last month was as exciting for the wind sector as it was surprising. But, when you look closer at the negotiations surrounding this deal, it is clear that oil was an even bigger winner.

The deal that saw the PTC reinstated also involved lifting a 40-year ban on US oil exports. This is great for the US oil and gas sector.

It is likely to lead to major growth in US oil production, and will only increase the importance of oil exports to the US economy when prices start rising again. One estimate is that lifting this ban could lead to the production of an extra 500,000 barrels of oil a day. This is hardly the pro-renewables policy we expect of a nation that signed the COP21 global climate deal in Paris last month.

We should not be too critical of US Democrats for taking the PTC deal that was offered. It was always going to take an almighty trade-off with the anti-wind Republicans to extend the PTC and solar subsidies. We would not have a deal without a big trade-off.

But let’s not pretend that this was the perfect deal for those in the renewable energy sector, or for the planet as a whole. It wasn’t.

Think of it like this. The US wind sector won a five-year extension of the PTC, in which this vital subsidy will be wound up. In contrast, US oil won the right to sell as much ‘black gold’ as it can overseas in perpetuity, with all the environmental damage that brings.

Still, there are positives, and the PTC extension is good for wind. It last lapsed at the end of 2014, and negotiations in the Congress last year gave no indication that it would be extended again. Getting a deal is good. Getting it for five years is even better.

US investors now have certainty that the PTC is to stay at its current level this year before gradual cuts until it is phased out at the end of 2019. This deal means US developers can invest in projects that should make wind power more competitive; turbine manufacturers can invest in their operations; and the cycle of construction boom and bust that has long been a feature of the US wind sector should be consigned to history. That is all positive.

The American Wind Energy Association has said this would help the US wind sector build 19GW of new capacity over the next five years. And, when the PTC runs out, wind should get support under Barack Obama’s Clean Power Plan.

In his final year as US president, we expect to see more plans from Obama as he seeks to cement his ‘green’ credentials. We hope he does not have to give away too much to make them happen.

Sometimes you just have to take the deal on the table.

Now, don’t get us wrong. The five-year extension of the US wind production tax credit last month was as exciting for the wind sector as it was surprising. But, when you look closer at the negotiations surrounding this deal, it is clear that oil was an even bigger winner.

The deal that saw the PTC reinstated also involved lifting a 40-year ban on US oil exports. This is great for the US oil and gas sector.

It is likely to lead to major growth in US oil production, and will only increase the importance of oil exports to the US economy when prices start rising again. One estimate is that lifting this ban could lead to the production of an extra 500,000 barrels of oil a day. This is hardly the pro-renewables policy we expect of a nation that signed the COP21 global climate deal in Paris last month.

We should not be too critical of US Democrats for taking the PTC deal that was offered. It was always going to take an almighty trade-off with the anti-wind Republicans to extend the PTC and solar subsidies. We would not have a deal without a big trade-off.

But let’s not pretend that this was the perfect deal for those in the renewable energy sector, or for the planet as a whole. It wasn’t.

Think of it like this. The US wind sector won a five-year extension of the PTC, in which this vital subsidy will be wound up. In contrast, US oil won the right to sell as much ‘black gold’ as it can overseas in perpetuity, with all the environmental damage that brings.

Still, there are positives, and the PTC extension is good for wind. It last lapsed at the end of 2014, and negotiations in the Congress last year gave no indication that it would be extended again. Getting a deal is good. Getting it for five years is even better.

US investors now have certainty that the PTC is to stay at its current level this year before gradual cuts until it is phased out at the end of 2019. This deal means US developers can invest in projects that should make wind power more competitive; turbine manufacturers can invest in their operations; and the cycle of construction boom and bust that has long been a feature of the US wind sector should be consigned to history. That is all positive.

The American Wind Energy Association has said this would help the US wind sector build 19GW of new capacity over the next five years. And, when the PTC runs out, wind should get support under Barack Obama’s Clean Power Plan.

In his final year as US president, we expect to see more plans from Obama as he seeks to cement his ‘green’ credentials. We hope he does not have to give away too much to make them happen.

Sometimes you just have to take the deal on the table.

Now, don’t get us wrong. The five-year extension of the US wind production tax credit last month was as exciting for the wind sector as it was surprising. But, when you look closer at the negotiations surrounding this deal, it is clear that oil was an even bigger winner.

The deal that saw the PTC reinstated also involved lifting a 40-year ban on US oil exports. This is great for the US oil and gas sector.

It is likely to lead to major growth in US oil production, and will only increase the importance of oil exports to the US economy when prices start rising again. One estimate is that lifting this ban could lead to the production of an extra 500,000 barrels of oil a day. This is hardly the pro-renewables policy we expect of a nation that signed the COP21 global climate deal in Paris last month.

We should not be too critical of US Democrats for taking the PTC deal that was offered. It was always going to take an almighty trade-off with the anti-wind Republicans to extend the PTC and solar subsidies. We would not have a deal without a big trade-off.

But let’s not pretend that this was the perfect deal for those in the renewable energy sector, or for the planet as a whole. It wasn’t.

Think of it like this. The US wind sector won a five-year extension of the PTC, in which this vital subsidy will be wound up. In contrast, US oil won the right to sell as much ‘black gold’ as it can overseas in perpetuity, with all the environmental damage that brings.

Still, there are positives, and the PTC extension is good for wind. It last lapsed at the end of 2014, and negotiations in the Congress last year gave no indication that it would be extended again. Getting a deal is good. Getting it for five years is even better.

US investors now have certainty that the PTC is to stay at its current level this year before gradual cuts until it is phased out at the end of 2019. This deal means US developers can invest in projects that should make wind power more competitive; turbine manufacturers can invest in their operations; and the cycle of construction boom and bust that has long been a feature of the US wind sector should be consigned to history. That is all positive.

The American Wind Energy Association has said this would help the US wind sector build 19GW of new capacity over the next five years. And, when the PTC runs out, wind should get support under Barack Obama’s Clean Power Plan.

In his final year as US president, we expect to see more plans from Obama as he seeks to cement his ‘green’ credentials. We hope he does not have to give away too much to make them happen.