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79–489—PDF 2012

S. HRG. 112–728 

RENEWABLE ENERGY TAX INCENTIVES: HOW 

HAVE THE RECENT AND PENDING EXPIRATIONS 

OF KEY INCENTIVES AFFECTED THE RENEWABLE 

ENERGY INDUSTRY IN THE UNITED STATES? 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY, NATURAL RESOURCES, 

AND INFRASTRUCTURE 

OF THE

COMMITTEE ON FINANCE 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

MARCH 27, 2012 

( 

Printed for the use of the Committee on Finance 

COMMITTEE ON FINANCE 

MAX BAUCUS, Montana, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JEFF BINGAMAN, New Mexico 

JOHN F. KERRY, Massachusetts 

RON WYDEN, Oregon 

CHARLES E. SCHUMER, New York 

DEBBIE STABENOW, Michigan 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

ROBERT MENENDEZ, New Jersey 

THOMAS R. CARPER, Delaware 

BENJAMIN L. CARDIN, Maryland 

ORRIN G. HATCH, Utah 

CHUCK GRASSLEY, Iowa 

OLYMPIA J. SNOWE, Maine 

JON KYL, Arizona 

MIKE CRAPO, Idaho 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN CORNYN, Texas 

TOM COBURN, Oklahoma 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

RUSSELL SULLIVAN, Staff Director 

CHRIS CAMPBELL, Republican Staff Director 

SUBCOMMITTEE ON ENERGY, NATURAL RESOURCES, AND INFRASTRUCTURE

JEFF BINGAMAN, New Mexico, Chairman 

JOHN D. ROCKEFELLER IV, West Virginia 

KENT CONRAD, North Dakota 

JOHN F. KERRY, Massachusetts 

MARIA CANTWELL, Washington 

BILL NELSON, Florida 

THOMAS R. CARPER, Delaware 

JOHN CORNYN, Texas 

CHUCK GRASSLEY, Iowa 

PAT ROBERTS, Kansas 

MICHAEL B. ENZI, Wyoming 

JOHN THUNE, South Dakota 

RICHARD BURR, North Carolina 

(II) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Bingaman, Hon. Jeff, a U.S. Senator from New Mexico, chairman, Subcommittee on Energy, Natural Resources, and Infrastructure, Committee 

on Finance ............................................................................................................ 1 

Cornyn, Hon. John, a U.S. Senator from Texas .................................................... 2 

WITNESSES 

Zindler, Ethan, head of policy analysis, Bloomberg New Energy Finance, 

Washington, DC ................................................................................................... 4 

Purcell, John, vice president–wind energy, Leeco Steel, Lisle, IL ....................... 5 

Zycher, Dr. Benjamin, visiting scholar, American Enterprise Institute, Washington, DC ............................................................................................................. 7 

Ragan, John P., vice president of business development and government 

affairs, TPI Composites, Scottsdale, AZ ............................................................. 10 

ALPHABETICAL LISTING AND APPENDIX MATERIAL 

Bingaman, Hon. Jeff: 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 23 

Cornyn, Hon. John: 

Opening statement ........................................................................................... 2 

Purcell, John: 

Testimony .......................................................................................................... 5 

Prepared statement .......................................................................................... 24 

Ragan, John P.: 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 26 

Zindler, Ethan: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 34 

Zycher, Dr. Benjamin: 

Testimony .......................................................................................................... 7 

Prepared statement .......................................................................................... 38 

COMMUNICATIONS

The American Institute of Architects ..................................................................... 61 

Biomass Fuel Company, LLC ................................................................................. 67 

Biotechnology Industry Organization (BIO) .......................................................... 72 

National Biodiesel Board (NBB) ............................................................................. 81 

National Hydropower Association .......................................................................... 85 

Nuvera Fuel Cells, Inc. ........................................................................................... 89 

Third Way Progressives .......................................................................................... 91 

Window and Door Manufacturers Association ...................................................... 101 

(III) 

(1) 

RENEWABLE ENERGY TAX INCENTIVES: 

HOW HAVE THE RECENT AND PENDING 

EXPIRATIONS OF KEY INCENTIVES AFFECTED 

THE RENEWABLE ENERGY INDUSTRY 

IN THE UNITED STATES? 

TUESDAY, MARCH 27, 2012

U.S. SENATE,

SUBCOMMITTEE ON ENERGY, NATURAL

RESOURCES, AND INFRASTRUCTURE, 

COMMITTEE ON FINANCE, 

Washington, DC. 

The hearing was convened, pursuant to notice, at 2:45 p.m., in 

room SD–215, Dirksen Senate Office Building, Hon. Jeff Bingaman 

(chairman of the subcommittee) presiding. 

Present: Senators Cornyn, Carper, and Thune. 

Also present: Democratic Staff: Ryan Martel, Staff Director, Subcommittee on Energy, Natural Resources, and Infrastructure. Republican Staff: Andrew Siracuse, Tax Counsel. 

OPENING STATEMENT OF HON. JEFF BINGAMAN, A U.S. SENATOR FROM NEW MEXICO, CHAIRMAN, SUBCOMMITTEE ON 

ENERGY, NATURAL RESOURCES, AND INFRASTRUCTURE, 

COMMITTEE ON FINANCE 

Senator BINGAMAN. Why don’t we get started here? Thank you 

all very much for coming. Today, the hearing is to try to understand how recent and pending expiration of key tax incentives affects deployment of renewable energy facilities, energy efficiency 

measures, and advanced biofuels. 

Last December, the same subcommittee met to consider the effects of short-term extensions and frequent expirations on the renewable energy industry. Almost all the witnesses argued that 

intermittent incentives severely stunted the promise of clean energy in the United States. They illustrated how the constant threat 

of expiration prevents the build-out of a robust manufacturing sector and supply chain, which are the pieces of this energy mix that 

create the majority of the jobs in these industries. 

We undoubtedly will get some testimony on the extent of the 

support that is being provided. I gather the Congressional Budget 

Office recently issued a brief on this subject, which stated, ‘‘Tax 

preferences for energy were first established in 1916. Until 2005, 

they were primarily intended to stimulate domestic production of 

oil and natural gas. It was not until 2006 that an increasing share 

2 

* For more information, see also, ‘‘Present Law and Analysis of Energy-Related Tax Expenditures,’’ Joint Committee on Taxation staff report, March 23, 2012 (JCX–28–12), https:// 

www.jct.gov/publications.html?func=startdown&id=4414. 

of energy-related tax expenditures began to shift to renewables and 

to energy efficiency.’’ 

So, as I say, I am sure we will get testimony on this very point. 

Clean energy and energy diversity, both of which I think are important goals for our country, have not always been perceived as 

a partisan issue. In fact, the legislation that most directly put the 

U.S. on the path toward clean energy and toward efficiency was the 

2005 energy bill, which, of course, was conceived of and written 

and passed by a Republican-led Senate and a Republican-led 

House. It was signed by President Bush. 

Much of today’s discussion will center on the credit for wind that 

expires this year, and I think we need to understand the effect of 

not going ahead and extending that. 

There are other important incentives for advanced biofuels, for 

energy efficient homes, for buildings and appliances, for combined 

heat and power, for fuel cells for advanced vehicles, and these are 

all the subject of our hearing today.* 

[The prepared statement of Senator Bingaman appears in the appendix.] 

Senator BINGAMAN. So let me go ahead and defer to Senator 

Cornyn for any comments he has, and then I will introduce our 

panel of witnesses. 

OPENING STATEMENT OF HON. JOHN CORNYN, 

A U.S. SENATOR FROM TEXAS 

Senator CORNYN. Well, thank you, Mr. Chairman, for holding 

this very important hearing today. I am pleased to join you, and 

I think we demonstrate bipartisan support for an ‘‘all of the above’’ 

energy policy. And this is certainly an important part of it. 

I am struck a little bit by the irony, though, of what is happening 

on the floor of the Senate as we are talking about these particular 

alternative energy provisions, the so-called Repeal Big Oil Tax Subsidy Act, which will do nothing to lower the price of gasoline at the 

pump. It will not provide any relief for consumers at all. All it will 

do is raise taxes on the domestic oil and gas industry, which will 

then be passed on to the consumer. And, like I said, it will make 

things worse rather than better. 

We can do better than that, and I, for one, believe that we need 

to get all of these various tax provisions on the table, as the President’s own bipartisan commission recommended, and take a look at 

them and see which ones make sense and which ones do not. 

One of the challenging issues we have is that many of these tax 

provisions, albeit temporary at the time they were passed, have 

been renewed without enough scrutiny, and that is why I think 

this hearing is so important, examining whether they are needed 

in order to get infant industries started and new technology, or 

whether the time has long since passed for us to sunset them. 

Finally, I just want to mention, also, the Keystone XL pipeline, 

which I am, unfortunately, disappointed that the President has 

continued to not approve, despite his appearance at Cushing, OK 

the other day, where he talked about the one-third of the pipeline 

3 

that does not require his permission to be completed and which 

does not provide additional oil. 

My constituents in the Port Arthur area, where we have some of 

the largest refining capacity in the country, would love to have 

700,000 barrels of Canadian oil come through the Keystone XL 

pipeline so that they could refine that into gasoline and other petroleum products. 

In Texas, like New Mexico, we know the importance of a stable, 

secure supply of affordable energy, and we are blessed with a diverse array of energy sources and industries providing solid employment to Texans, while supplying the Nation. 

Many, of course, will argue for extensions of valuable tax incentives for their industry, and I get that, I understand that, but I 

think the question should be—and I trust our witnesses will address this—are we getting the best bang for our buck? And which 

ones should we extend? Which ones should we modify? Perhaps 

which ones should we sunset, and which ones should we eliminate? 

That remains the duty of Congress to answer. 

An analysis by the Congressional Research Service for energytargeted tax incentives shows that, while the majority of U.S. primary energy production comes from fossil resources, the majority 

of energy tax-related revenue losses are associated with provisions 

designed to support renewables. And that is perhaps predictable, 

because the oil and gas industry, an established industry, does not 

need these tax credits or subsidies, as the President sometimes 

uses the word. It does not deserve to be treated any better or any 

worse than other business in America. But the fact is, most of the 

tax-related revenue losses are associated with renewable sources. 

If we want to put all the tax reforms on the table, then I think 

these are some of the relevant considerations. And I mentioned the 

President’s own fiscal commission that argued that, in order to 

make our tax code and America more competitive—we will have 

the highest corporate tax rate in the world once Japan lowers its 

rate—we need to eliminate a lot of tax expenditures, flatten the 

code, make it more growth-oriented, and make us more competitive 

in a global economy. 

I look forward to hearing from the witnesses. And thank you, 

again, Mr. Chairman. 

Senator BINGAMAN. Let me briefly introduce our four witnesses 

here. Starting on the left there is Mr. Ethan Zindler, who is the 

head of policy analysis for Bloomberg New Energy Finance here in 

Washington. Second is Mr. John Purcell, who is vice president of 

wind energy with Leeco Steel. Thank you for being here. Dr. Benjamin Zycher is a visiting scholar with the American Enterprise Institute. Thank you for coming today. And Mr. John Ragan is the 

vice president of business development and government affairs 

with TPI Composites in Scottsdale, AZ. 

If each of you could take 5 or so minutes and give us the main 

points you think we need to understand about this set of issues, 

and then I am sure both Senator Cornyn and I will have some 

questions. 

Mr. Zindler, did you want to go first? 

4 

STATEMENT OF ETHAN ZINDLER, HEAD OF POLICY ANALYSIS, 

BLOOMBERG NEW ENERGY FINANCE, WASHINGTON, DC 

Mr. ZINDLER. I will. Thank you very much, Senator. In the interest of time, I am going to read most, but not all of my written remarks, and all of that will go in the record. 

Good afternoon, Senators and fellow committee members, ladies 

and gentlemen. Thank you for the invitation to allow me to share 

my thoughts here today. 

I come here today in my role as head of policy analysis of Bloomberg New Energy Finance, a market research firm focused on the 

clean energy sector. Our clients include major investment banks, 

wind, solar, and other clean energy equipment makers, venture 

capitalists, and project developers, plus major energy companies 

and the oil majors. Our primary mission as a firm is to provide 

timely, accurate, and actionable data and insight on investment 

technology and policy trends in clean energy. 

My remarks today represent my views alone as a clean energy 

industry analyst. They do not represent the corporate positions of 

either Bloomberg LP or Bloomberg New Energy Finance. In addition, they do not represent specific investment advice and should 

not be construed as such. 

The subject of today’s hearing is the role of tax credits in today’s 

development of technologies related to power generation and efficiency and those related to transport fuels. I would argue that tax 

credits have played different roles in these two areas and should 

be addressed separately. 

Before touching on the tax credit issue, however, I would like to 

update the committee on clean energy investment trends globally. 

Last year, the industry set a record, attracting $260 billion in new 

outside investment, up from $54 billion in 2004. In the fourth quarter of last year, we counted the 1 trillionth dollar of new investment in clean energy globally. 

The U.S., despite featuring strong supports in some States, has 

not enshrined long-term national targets or goals for clean power 

generation. Still, the U.S. actually led the world in attracting new 

investment last year for clean energy with over $55 billion in new 

funds deployed here, mostly in private money. This marked the 

first time since 2008 that the U.S. did not finish second to China 

in new clean energy capital attracted, and we will detail more of 

this in a report with the Pew Center in a few weeks. 

There is little to suggest that the U.S., however, will maintain 

its leadership position this year or next. Last year’s surge in private U.S. investment was a direct reaction to policies that were due 

to expire in 2011 or 2012. These included the 1603 Treasury grant 

program, the 1703 loan guarantee program, and the production tax 

credit, or PTC, which benefits primarily the wind industry. And 

these three programs had the effect of frontloading U.S. renewables 

investment into calendar year 2011. In 2012 and 2013, the echo effect of this frontloading will almost certainly be felt. 

With that as context, let me turn to the PTC, which has long 

played a critical role in the development of the U.S. wind industry 

since being established by Senator Grassley and others in 1992. 

The credit has expired 3 times in the last dozen years. On each ocVerDate Nov 24 2008 21:00 Mar 12, 2013 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 R:\DOCS\79489.000 TIMD
5 

casion, the result has been a sharp drop in new installations for 

wind. 

We are now on a course for another such fall next year. Bloomberg New Energy Finance forecasts approximately 9,500 megawatts of new power generating capacity will be installed in 2012, 

but just 500 megawatts will be installed in 2013. That would see 

the industry go from registering one of its best years on record to 

one of its very worst since 2004. 

What is likely to make the upcoming PTC expiration more dramatic is that the U.S. now has substantially more manufacturing 

capacity on its own soil. When the PTC expired at the end of 2003, 

resulting in a sharp drop in installations in 2004, there was insufficient domestic manufacturing to meet wind turbine demand, meaning project developers were importing final goods, mostly manufactured in Denmark, Germany, or Spain. When the PTC expired 

then, manufacturers in Europe mostly felt the pinch. 

This time, the U.S. has over 13,000 megawatts or 13 gigawatts 

of final turbine assembly capacity on its soil. Again, without the 

PTC, we expect just .5 gigawatts of demand for that equipment in 

the U.S. in 2013. 

All of that said, I would note that extending the PTC will not be 

a panacea for the U.S. wind market, which will remain at overcapacity in 2013, regardless of the tax credit. We forecast that, if 

Congress would extend this credit now, approximately 3.5 gigawatts of new capacity would get built in 2013. This falls far short 

of matching the over 13 gigawatts of domestic manufacturing capacity. 

The wind industry has made major strides in both improving the 

efficiency of industrial scale equipment and reducing capital costs. 

The result is that wind developers can now sell their power at between $30 and $70 per megawatt hour and earn respectable returns in the U.S. 

In some part of the world, including some parts of the U.S., wind 

can already compete and beat out its fossil rivals on cost, without 

the benefit of subsidies. However, the industry today finds itself 

under pressure from low electricity prices due to both relatively 

weak economic conditions and to unusually cheap natural gas, 

which today is trading at its lowest level in 2 decades. 

The expiration of the PTC would add a third negative factor. It 

would make what is likely to be a challenging year considerably 

more difficult for the industry. 

And with that, I see that my time is up, and I will conclude my 

remarks. I am happy to answer any questions on the subject matter touched on in the second half of my written statement. 

[The prepared statement of Mr. Zindler appears in the appendix.] 

Senator BINGAMAN. Thank you very much. 

Mr. Purcell? 

STATEMENT OF JOHN PURCELL, VICE PRESIDENT–WIND 

ENERGY, LEECO STEEL, LISLE, IL 

Mr. PURCELL. Thank you, Chairman Bingaman, Ranking Member Cornyn, and subcommittee members. My name is John Purcell, 

and I serve as vice president–wind energy for Leeco Steel. I appreciate the opportunity to speak briefly today about the impact on 

6 

Leeco Steel in the U.S. and the U.S. wind energy sector due to the 

impending expiration of the renewable energy production tax credit. 

We at Leeco Steel feel it is imperative that the PTC is extended 

in its full form as presented in S. 2201, the American Energy and 

Job Promotion Act, which was recently introduced by Senators 

Grassley and Mark Udall. 

Leeco Steel is a wholly owned subsidiary of O’Neal Steel, the 

largest privately held metals distribution company in the United 

States, which is headquartered in Birmingham, AL. Leeco is 

headquartered in Lisle, IL, a western suburb of Chicago. Leeco 

Steel is a carbon, high-strength, low-alloy steel plate distributor 

and processor, serving the United States, Mexico, and South America from seven locations throughout these regions. We have distribution facilities in Portage, IN, Oshkosh, WI, Pittsburgh, PA, 

Chattanooga, TN, and Fort Worth, TX. 

Leeco Steel first began delivering steel plates and fabricated 

plate products into the wind industry in 2004. Revenues from the 

wind industry now account for nearly 40 percent of our company’s 

total revenue. The wind business for Leeco has become a keystone 

of our overall business and a driver for development of our company. Leeco Steel has provided hundreds of thousands of tons of 

steel plates to 12 tower manufacturing facilities in 12 States across 

the U.S., most of which have been built in the past 8 years. 

The PTC has helped us to expand our company in the wind industry and into new markets, and has helped us weather the recent economic downturn. Since the early development of our wind 

business, we have hired over 70 people in Leeco Steel to help maintain these growth strategies that we have planned for our company. 

In the past 6 years, when there has been a certainty to the PTC, 

our wind business and the wind industry overall have been a major 

job creation success story. Of the 12 tower factories mentioned 

above, 10 of these factories did not exist before 2002. Taking an average of 250 employees per factory, that is 2,500 new good-paying 

jobs that were created in a very short amount of time within our 

supply chain alone. This does not take into account the thousands 

of additional jobs that exist in the supply chain that supplies goods 

and services to each of these 12 factories. 

Because of the PTC, the U.S. wind industry overall has seen tremendous growth and innovation. Wind energy now provides nearly 

3 percent of America’s electricity, with that number surpassing 20 

percent in the State of Iowa. 

Overall, wind energy has accounted for 35 percent of all new 

electric generating capacity in the last 5 years. The wind industry 

has generated investment upward of $20 billion annually, which is 

greater than the economic impact on U.S. GDP from Colombia, 

Panama, and the South Korea free trade agreements combined. 

Since the PTC was last allowed to expire, there was approximately only 25 percent domestic content in each wind turbine that 

was erected. Today, we have approximately 60 percent domestic 

content in each installed turbine. 

With the uncertainty of an extension of a PTC, many of Leeco’s 

expansion plans are at risk. There have been high-level discussions 

7 

to increase the amount of steel plate capacity for the wind business 

in the coming years. However, those discussions have now gone silent, as there needs to be business case certainty to move forward 

with such huge capital investments. 

In similar fashion, over the years, many plans to increase wind 

tower production in the U.S. have been scrapped due to the business case uncertainty caused by the on again-off again nature of 

the PTC. The wind industry as a whole has already seen layoffs as 

a result of this uncertainty. 

Many plans to add existing facilities or invest in new facilities 

are on indefinite hold or have been scrapped altogether. Industrywide, 37,000 jobs will be lost if the PTC is not extended. 

It is my opinion that the supply chain was built and billions of 

dollars invested in this industry due to companies’ expectations of 

a long-term PTC in place that would allow for stable growth in the 

wind energy sector for many years to come. Major factories have 

been established from coast-to-coast, and many North American 

headquarters have been established in cities such as Chicago, Portland, OR, and Denver. Without an extension of this PTC, all the 

assets are at premium risk of being shuttered or dramatically 

downsized. 

With an immediate extension of the PTC, the development and 

construction of these turbines can continue as planned. The tens of 

thousands of jobs that can be created with this extension will allow 

the wind industry not only to continue to be a leader in job creation, but help secure our Nation’s energy future by lessening the 

reliance on foreign sources of energy. The PTC is also crucial for 

regaining our Nation’s leadership in new technology innovation 

that will keep our economy competitive. 

The wind industry is on the verge of becoming competitive without the PTC, but failing to extend the PTC immediately will prevent us from finishing the job. 

Again, thank you for the opportunity to be here today to hopefully give a little insight into the role of manufacturing that has 

been created in this country to support an industry that is on the 

cusp of being fully competitive with all major sources of electricity 

generation. 

Thank you. 

[The prepared statement of Mr. Purcell appears in the appendix.] 

Senator BINGAMAN. Thank you. 

Dr. Zycher, go right ahead. 

STATEMENT OF DR. BENJAMIN ZYCHER, VISITING SCHOLAR, 

AMERICAN ENTERPRISE INSTITUTE, WASHINGTON, DC 

Dr. ZYCHER. Well, thank you, Mr. Chairman and Ranking Member Cornyn. I am very pleased to have this opportunity to offer my 

views on why renewable energy subsidies should be abandoned. 

I have submitted a formal statement for the record on the economics and policy analytics of renewable electricity. Today I will 

concentrate on three central themes, which generally are applicable 

to biofuels and related topics as well. At the end, I will be very 

pleased to address any questions that you may have. 

The first theme: Despite very substantial policy support in the 

form of direct and indirect subsidies at the Federal and State levVerDate Nov 24 2008 21:00 Mar 12, 2013 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 R:\DOCS\79489.000 TIMD
8 

els, renewable electricity has only a small share of the electricity 

market, with poor prospects for growth. This is due to three inherent problems that public policies can overcome only at very substantial cost to taxpayers, ratepayers, and the economy as a whole, 

with the additional adverse effect of significant market distortion. 

These inherent problems can be summarized as the unconcentrated energy content of wind flows and sunlight; siting constraints 

and the higher transmission costs that result; and the intermittency and unreliability problem, which yields very large additional 

costs for backup generation. Each of these inherent problems is discussed in detail in the testimony that I have submitted for the 

record, but the central effect can be stated quite simply. We have 

achieved the perfect green trifecta—higher costs, less reliability, 

and more pollution. 

The second theme: The five central rationales that usually are offered in defense of policy support for renewables are deeply problematic. First, the infant industry rationale—subsidies are needed 

to achieve scale economies and learning efficiencies—is inconsistent 

with the existence of an international capital market and with the 

cost evidence published by the Energy Information Administration 

and by the Department of Energy. 

Second, the level playing field rationale—subsidies for renewables are needed as an offset for subsidies enjoyed by conventional 

generation—simply is incorrect. The subsidies per megawatt hour 

enjoyed by renewable power are far greater than those received by 

conventional electricity, both on average and on the margin. 

Third, the pollution or externality rationale ignores the large effects of our environmental policies. It ignores also the cost of 

backup generation imposed by renewable power upon the electricity 

market, an adverse effect far greater than even the highest estimates of environmental costs of conventional generation reported 

in the peer-reviewed literature. 

Fourth, the resource depletion or sustainability rationale is incorrect simply as a matter of basic economics and is inconsistent with 

the historical evidence in any event. 

Finally, the green jobs rationale borders on the preposterous. It 

confuses benefits for particular groups with costs imposed upon the 

economy as a whole. It ignores the adverse employment effects in 

the industries that lose when government attempts to pick winners. There are, after all, no free lunches. It ignores the adverse 

employment effects of increases in electricity costs. It ignores the 

adverse employment effects of the taxes needed to finance current 

and future subsidies, and it is utterly oblivious to the starkly adverse experience in Europe, which also was mesmerized by the 

green jobs mirage. 

Under the green jobs analytic framework, we could create a lot 

of employment if we outlawed the use of heavy equipment for 

digging ditches and mandated instead the use of shovels or, for 

that matter, spoons. That sounds pretty ridiculous, does it not? 

Well, there is no analytic difference between inefficient ditchdigging and inefficient power generation as tools with which to pursue increased employment—none. 

The third theme: Ongoing and prospective developments in the 

market for natural gas will worsen the already poor competitive poVerDate Nov 24 2008 21:00 Mar 12, 2013 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 R:\DOCS\79489.000 TIMD
9 

sition of renewable electricity. Because of the dramatic increase in 

natural gas supplies attendant upon the application of hydraulic 

fracturing technology, the EIA projection of gas prices over the next 

20 years has declined by about 20 percent, and the EIA projection 

of non-hydroelectric renewable generating capacity also has declined by about 20 percent, specifically because of reduced competitiveness. 

There was a headline in the Wall Street Journal dated August 

22, 1978 that read, ‘‘Solar power seen meeting 20 percent of needs 

by 2000, Carter may seek outlay boost.’’ That forecast had a lot of 

company. In 1971, the National Academy of Sciences argued that, 

‘‘It will take only another 50 years to use up the great bulk of the 

world’s supply of recoverable petroleum liquids and natural gas.’’ 

In 1977, the Executive Office of the President argued that ‘‘supplies of oil are diminishing, and world oil will become very scarce 

and very expensive in the 1980s.’’ In 1978, the executive director 

of the International Energy Agency argued that, ‘‘All available evidence points to a serious energy crisis in the middle or late 1980s.’’ 

In 1979, the Central Intelligence Agency argued that, ‘‘The world 

can no longer count on increases in oil production to meet its energy needs.’’ In 1980, the Secretary of Energy argued that, ‘‘Oil 

supplies will be running out in a couple of decades.’’ In 1979, the 

chairman of Exxon argued that, ‘‘We’re going to be facing shortages 

and higher prices for years.’’ In fairness, the Exxon chairman made 

that statement on New Year’s Eve. 

There is a dual theme common to all such predictions: first, the 

substitution of the musings of experts, policymakers, and professional commentators in place of market forces and, second, a batting average of zero. As we look back, we find the 1944 Synthetic 

Liquid Fuels Act; the 1954 Atomic Energy Act; Project Independence in the 1970s; the 1978 National Energy Act; the 1980 Synthetic Fuels Corporation Act; the 1980 Magnetic Fusion Energy Engineering Act; the 1992 Energy Policy Act and the production tax 

credit; the 1993 Partnership for New Generation Vehicles (the 80- 

mile-per-gallon car was just around the corner); the 2005 Energy 

Policy Act implementation of the renewable fuel standard, otherwise known as the corn ethanol boondoggle; the 2007 Energy Independence and Security Act; the 2008 Energy Improvement and Extension Act; and the energy provisions of the 2009 American Recovery and Reinvestment Act, that is, the stimulus legislation. 

The eternal truth is that government subsidies for renewable energy are swimming against a strong tide of market forces and are 

doomed to the same failures that we have experienced time and 

again. Moreover, such policies have the more subtle effect of inducing ever more interest groups to seek favors from government—not 

a salutary outcome. 

Thank you again, Mr. Chairman, Ranking Member Mr. Cornyn, 

and I will be, again, very pleased to address any questions that you 

may have. 

[The prepared statement of Dr. Zycher appears in the appendix.] 

Senator BINGAMAN. Mr. Ragan, why don’t you go right ahead? 

10 

STATEMENT OF JOHN P. RAGAN, VICE PRESIDENT OF BUSINESS DEVELOPMENT AND GOVERNMENT AFFAIRS, TPI COMPOSITES, SCOTTSDALE, AZ 

Mr. RAGAN. Good afternoon, Chairman Bingaman, Ranking 

Member Cornyn, members of the committee. Thank you for your 

leadership on this matter and for the opportunity to join you this 

afternoon to discuss the effect that the expiration of the production 

tax credit, the PTC, will have on wind energy companies like TPI 

Composites. I would also like to thank Senator Grassley for reintroducing his bill, which will extend the PTC. 

I appear before the committee as the vice president of business 

development and government affairs of TPI Composites and as a 

corporate member of the American Wind Energy Association. 

TPI is a manufacturer of blades for wind turbine makers, including GE Energy and Mitsubishi Power Systems. With roughly 1,400 

U.S. employees, TPI is headquartered in Scottsdale, AZ and operates factories in Rhode Island, Massachusetts, Mexico, China, Turkey, and in Newton, IA, formerly the home of Maytag appliance 

manufacturing. 

The wind energy industry is a U.S. manufacturing success story. 

U.S. wind experienced significant growth from 2004 to 2009, primarily due to a growing economy where energy consumption increased, coupled with State and Federal policies promoting production of renewable energy, State renewable portfolio standards, and 

the Federal PTC creating reasonable stability for wind developers 

and suppliers to invest in wind farms and manufacturing plants. 

That growth led to the industry creating over 75,000 U.S. jobs 

and several thousand small to large U.S. companies participating 

in the chain. It also led to the wind industry becoming a significant 

provider of energy to consumers. Over the past 5 years, wind represented 35 percent of all new generating capacity installed. For 5 

consecutive years, wind has been second only to natural gas as a 

source of new electrical capacity. 

Through this time, investments in wind assets have topped $20 

billion a year. According to the U.S. Department of Energy report 

just published during the George W. Bush administration, wind 

power could provide 20 percent of U.S. electricity needs by the year 

2030. It is estimated that meeting this goal from wind would create 

500,000 U.S. jobs and reduce the current electric sector and natural 

gas consumption by nearly 50 percent. 

TPI Composites recognized the market opportunity years ago and 

opened its first dedicated wind blade plant in 2002. Since that 

time, we have added dedicated U.S. plants in Newton, IA and a 

blade development center in Fall River, MA. 

An important factor in our company’s growth has been stable and 

pro-market growth policies on the Federal and State levels. During 

most of the 2000s, the Federal PTCs allowed companies like ours 

to invest and grow supply chain plants around the country, as demonstrated in the chart to my left. The result is over 470 factories 

across 43 States in the U.S. providing wind components. 

The resurrection of Newton, IA is, we think, a terrific American 

story. Newton is a city of roughly 16,000 residents located 35 miles 

east of Des Moines. For many years, Maytag manufactured washVerDate Nov 24 2008 21:00 Mar 12, 2013 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 R:\DOCS\79489.000 TIMD
11 

ers and dryers and maintained its corporate headquarters in Newton, employing about 3,500 people at its peak. 

After being acquired by Whirlpool in 2006, plans were made to 

consolidate manufacturing into existing facilities in Ohio and Mexico. The remaining 1,900 employees in Newton lost their job, the 

last on October 25, 2007. 

Because of the growth in the wind industry—and much of it 

stimulated by the Federal PTC—TPI built a plant in Newton in 

2008 and today employs almost 800 people in the Jasper County 

region. 

TPI was not the only company who recognized the opportunity. 

Soon after our arrival in Newton, Trinity Towers opened its facility 

on the abandoned Maytag campus and has hired at least 125 employees to provide towers to many of the same customers, wind 

farms, to which TPI supplies blades. 

Second only to Texas for installed megawatts of wind, the State 

of Iowa is now getting 20 percent of its electricity from wind energy, which employs thousands of citizens across the State. Newton 

and Iowa are shining examples of how to create a U.S. wind energy 

hub, none of which could have occurred without the PTC. 

The opportunity to fulfill the wind energy industry potential is 

too important and too large for the U.S. not to forge ahead. Our 

work is not done yet. To achieve this desired economic and energy 

growth, I urge the U.S. Congress to pass a short-term extension of 

the PTC immediately, followed by long-term debate on wind policy 

as part of structural tax reform. 

Wind energy has been a source of important economic growth 

over the past 7 years, but the outlook for 2013 is bleak due to the 

pending expiration of the PTC. This tax credit has expired 3 times 

since 1999, leading in each case to dramatic declines, 70 to 90 percent in new wind power development. 

Although the PTC technically expires at the end of 2012, practically, it already has expired, as the delay in extending the credits 

is reducing investment in wind energy projects scheduled to come 

on line in 2013. Wind power plants and the component supply 

chain require months, if not years of planning. Wind investors and 

suppliers like TPI want to know what tax policies will apply before 

they commit to projects for the next calendar year. 

A recent study by Navigant Consulting concluded that 37,000 

jobs are likely to be lost with the effect of expiration of the tax 

credits, along with more than $11 billion in clean energy investment. 

The PTC is an effective tool that drives as much as $20 billion 

a year in private investment and is at the heart of one of America’s 

fast-growing manufacturing sectors. The PTC is not a handout. It 

is a business tax credit with funding based solely on project performance, not evaluation by government officials. 

With a stable, low rate, American wind power has provided more 

than a third of all new electric generating capacity across the U.S. 

in recent years and has kept the industry on track toward supporting 500,000 jobs by 2030. 

The Federal tax code, as it exists today, is not a broad-based proportionate system where every industry pays its own fair share. 

Rather, it has specific tax incentives for all forms of energy, most 

12 

of which are set in policy to promote economic growth. Trying to 

eliminate the PTC would place the wind industry at a tremendous 

disadvantage compared to other energy industries. 

While an immediate, short-term PTC extension is needed to stabilize the wind market, I also urge this committee and Congress to 

work on long-term extension of the PTC as it considers overall 

structural reform of the tax code. 

I know there has been broad support that exists across the political spectrum for extending the PTC. It is critical that the Congress 

act quickly to find a way through the current impasse and enact 

an immediate extension. We believe this is a starting point for U.S. 

job creation, a healthier economy, and a clean energy future. 

I would be more than happy to answer any questions you have. 

[The prepared statement of Mr. Ragan appears in the appendix.] 

Senator BINGAMAN. All right. Well, thank you all very much for 

your testimony. Let me start with a few questions. 

Mr. Zindler, you have a projection there that in 2013, if the PTC 

is not extended, you would see the wind energy installations being 

reduced to 500 megawatts in 2013, I guess, from 9,500 in the current year. Is that an accurate description? 

Mr. ZINDLER. Yes. That is accurate and in keeping with what 

some of the panelists said. It is not that difficult to forecast, only 

in the sense that you do have to place your order for a wind turbine pretty far in advance, and we track the contracts. And there 

are basically almost no orders for 2013 at this point. 

Senator BINGAMAN. You are saying also, as I understand it, that 

if we go ahead and extend the production tax credit and do that 

in the near future, that you would still project that the U.S. installation of wind power would just total 3.6 gigawatts of capacity in 

2013 as compared to 9.5 gigawatts in 2012. 

Can you explain why, regardless of the extension, even if Congress were to extend it, why you would expect such a reduction in 

wind power projects next year? 

Mr. ZINDLER. Yes. The industry is being hit by a couple of factors. Most importantly, electricity prices are down due to a less 

than robust economy and due to the fact that there has been a 

surge of natural gas capacity that has come on line. 

Those two factors are depressing power contract prices and are 

making it unusually difficult for the wind industry to compete, 

which is despite the fact that the industry has been dramatically 

improving its efficiency and bringing down its costs. 

Not to go on too long, but the one factor that could kind of very 

quickly change this picture is if the economy were to grow faster 

than is anticipated and/or if natural gas prices would pick back up, 

and many predict that natural gas prices will rise, because the current cost—and I checked this morning—of about $2.30 per million 

btu, in many cases, is below the cost of production for producers 

of natural gas. 

So that price, at least according to the Energy Information Administration and others, is not sustainable. So longer-term, we 

think things pick back up in 2014, 2015, but next year will be a 

difficult year for the reasons I just mentioned. 

Senator BINGAMAN. All right. Dr. Zycher, we did not ask you to 

address it and you did not address it, I do not believe, in your testiVerDate Nov 24 2008 21:00 Mar 12, 2013 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 R:\DOCS\79489.000 TIMD
13 

mony, but I take it, from your basic perspective, you would not 

favor us maintaining any of the various subsidies that are in the 

tax code for production of any kind of energy—oil and gas, coal, 

anything else. Am I accurate about that? 

Dr. ZYCHER. As a crude generalization, that is correct, yes. 

Senator BINGAMAN. So you think we should just eliminate all tax 

credits and subsidies in the energy area and allow different types 

of production to compete as they will? 

Dr. ZYCHER. Well, to the extent that the subsidies are specific to 

the energy subsectors and not generally applicable to all industries, 

and to the extent that there is not an economic case to be made 

for any given one, yes. There may be some specific subsidies that 

I am not familiar with, various depreciation wrinkles and things 

like that that one might be able to make an argument for. But, 

again, as a generalization, I would eliminate all the subsidies that 

are specific to energy and let these different technologies compete 

on an equal basis. 

Senator BINGAMAN. All right. Mr. Ragan, let me ask you and Mr. 

Purcell this, since you are both involved in businesses that relate 

to wind energy. If Congress were to decide that we are going to extend the wind energy production tax credit and decided we wanted 

to do so for a set period of years and perhaps phase it out over 5 

years or over 8 years or whatever and reduce it somewhat each 

year until that phase-out is complete, is that kind of a proposal 

that you think would make sense, or do you think that we should 

be maintaining the production tax credit at its current level indefinitely? 

Mr. Ragan, why don’t you go first, and then Mr. Purcell? 

Mr. RAGAN. Sure, Mr. Chairman. Obviously, the most important 

thing is to pass an immediate extension to stabilize the 2013 market. As I mentioned before, I think, certainly, from TPI’s perspective, that I hope industry and Congress come together to work on 

and reevaluate the PTC and a time period of a longer-term extension and to have those discussions. 

What the answer is today, I am not sure, but I think that would 

be very valuable in the context of tax reform. And I think there are 

many things going on in the marketplace with new technologies 

that, from our perspective, material selections are getting better. 

I think, though, our technology is driving the costs of wind down 

in the supply chain. So, coupled in that discussion with where the 

PTC is and the time limit and how much ought to occur, I think 

that is a valuable discussion to have. 

Senator BINGAMAN. Mr. Purcell? 

Mr. PURCELL. Yes. I think, Mr. Chairman, the eventuality is that 

it will no longer be needed, based on the technologies that are coming forth in the wind business, and I think we are starting to see 

that evidenced today. 

However, my company is in the most basic part of this, which is 

providing steel to the tower manufacturers, and on every level we 

are looking to get cost out of the product, and that is certainly part 

of our job, doing that at our company and with our steel mill partners just to provide a product that is stronger, maybe lighter steel, 

less steel, which sounds bad for us. 

14 

But, quite frankly, we are serving our customers to take cost out 

of the system so we can compete on our own. I do not think we are 

there yet, and I think that that is why we are here today telling 

you that an immediate short-term extension is something that we 

need, and then I think the evaluation needs to be a part of a broader energy policy discussion that allows all forms of energy to exist. 

And I think that the wind industry is rapidly bringing that cost 

to where we can compete with other forms of energy, especially fossil fuel. So I think there are still several years ahead of us yet. 

Senator BINGAMAN. Senator Cornyn? 

Senator CORNYN. Thank you, Mr. Chairman. 

I find myself agreeing with the vast majority of what every witness said, as strange as that may sound, because there are, I think, 

different elements in all of this, recognizing that, number one, we 

are going to have to have major tax reform in the country, which 

is going to dramatically change the tax code—at least that is my 

hope—for a flatter, broader-based tax that stimulates economic 

growth. 

And I would also like to see the government get a little bit out 

of the business of picking winners and losers in the marketplace, 

what some people have called crony capitalism, noting the connection sometimes between government largess and political support, 

which I think causes diminished confidence in the Federal Government. 

But I also believe that there probably is a role for government 

to play in new technologies, encouraging new technologies and development. The problem is, to paraphrase President Reagan, the 

closest thing to eternal life here on earth is, in this case, I would 

say, a tax credit or a tax subsidy. And the problem is, how does 

Congress, as opposed to the marketplace, determine when an industry cannot compete or when it can compete and it just needs a 

little more time? 

I would like to start with Mr. Zindler here in a moment. 

But, Dr. Zycher, you have a chart on page 12 of your testimony 

that I think is instructive in terms of the tax subsidies and support 

per megawatt hour for electricity. And I wonder if you would just 

summarize that for us, because I think some people not as familiar 

with the details of this may find some of the disparities shocking. 

Dr. ZYCHER. These are data taken directly from the Energy Information Administration estimate of Federal production subsidies 

and support per megawatt hour for the year 2010, and the data— 

I think I adjusted them for inflation. I think they reported in the 

EIA publication in either 2005 or 2009 dollars. I cannot remember. 

So I just used a very simple inflation adjustment. 

But the basic message is that subsidies for wind power, again, 

on average, per megawatt hour are one or two orders of magnitude 

higher than they are for conventional generation technologies and, 

for solar power, in particular thermal solar technologies, three or 

four times or three or four orders of magnitude higher. 

These are average subsidies. If you look at Professor Gil 

Metcalf’s work on marginal subsidies, you come up with basically 

the same answer. 

Senator CORNYN. That is on page 13 of your testimony. 

15 

Dr. ZYCHER. Yes. That is correct. Yes. I had forgotten I even had 

this in here. 

Senator CORNYN. Let me just ask, because time is short here, if 

I am reading this correctly, on page 12, it says that electricity 

production subsidies of support per megawatt hour for natural gas 

and petroleum liquids, it is $.63 per megawatt hour, but for solar 

it is $968. 

Dr. ZYCHER. Yes, that is correct. 

Senator CORNYN. And then there are ranges, with wind at 52, 

geothermal at 12, and the like. So there is a lot of variation in 

terms of how the U.S. Government treats different sources of energy in the tax code, correct? 

Dr. ZYCHER. Yes, that is correct. 

Senator CORNYN. Mr. Zindler, you understand our challenge, and 

I wonder if you have any comments on the approach that you 

would recommend that we should take when it comes to these tax 

provisions that exist. And, as Mr. Ragan makes a point, companies 

have started a business, built a business expecting those to continue, but the reality being that, at some point, they cannot, and 

that it makes no sense to ask the taxpayers to subsidize some of 

these industries that are able to compete on their own in the marketplace or else cannot compete at all and we ought to just pull the 

plug and move on. 

Mr. ZINDLER. Well, in my role, it is not my job to sort of recommend policy, but I think my own two cents on all of this is that 

there are value judgments that need to be made by policymakers 

like yourself and others in terms of what the priorities are, and 

then clear and defined and long-term policies need to be set and 

stuck to. 

And anything short of that, the kind of end-of-the-year tax extender scramble that we have seen on several occasions, the inconsistency, that is probably the worst thing you can do for the industry in terms of its long-term growth. 

Now, whether or not you decide that it is something that you 

want to flourish is really your determination. 

Senator CORNYN. Well, Mr. Purcell, I know you said Leeco Steel 

has a distribution facility in Fort Worth, and we are grateful for 

that and for the jobs your business creates. I wonder if you have 

any comments, briefly, on the questions or the issues that I raised 

in terms of how—I agree with Mr. Zindler that it takes a value 

judgment, but I wonder if you have any thoughts on what should 

inform that value judgment that Congress is ultimately going to 

have to make on whether there is a good case to be made to continue some of the tax treatments, let us say, for wind and solar and 

others or at what point we should decide that the marketplace 

should make that determination. 

Mr. PURCELL. Yes, sir. I think that, obviously, I am a huge believer in free markets, but I think there is a little bit more behind 

that. You have to take into consideration the fact that—and I am 

a little bit out of my bailiwick here, but, certainly, if you go back 

historically, when industries like nuclear energy were just getting 

started, the subsidies were much higher than they are for today’s 

current wind subsidies at, I think, the $52 that was stated just a 

minute ago. And we certainly can get you some facts behind that. 

16 

But I think that, if you take into consideration that, in my opinion, it is a national energy and national security issue to have 

many other forms of electricity generation other than just what we 

are using today, that it would be certainly very destructive to end 

the policy of these tax credits for wind and others. 

But, certainly, as I sit here today, I am a big believer that, with 

a little bit more time, this will be a competitive energy source and 

just, again, a huge jobs creator, and it is something that we certainly need. 

So, yes, I do believe it is something that will be competitive, and 

I think we need to continue. 

Senator CORNYN. Mr. Chairman, can I ask Mr. Ragan to comment? 

Senator BINGAMAN. Sure. 

Senator CORNYN. And just one other factor that your comments 

made me think of, Mr. Purcell, is that the other problem is, when 

Congress creates these various tax incentives and policies, we do 

not do a very good job of anticipating or reacting to innovation— 

and, of course, the production of shale gas and the cheap gas now 

which has made even nuclear power and others as a source for 

electricity generation less competitive, certainly. 

But, Mr. Ragan, I wonder if you have any comments. 

Mr. RAGAN. Sure. Senator, I think I will echo Mr. Purcell’s—a 

few of Mr. Purcell’s thoughts. Certainly, a broad array of energy 

production and energy sources is probably, from a policy standpoint, a good thing for our country. 

In addition to that, I think that a big question for us, and certainly for our business decisions in the markets we go after, in 

wind’s case, is, are we cutting the cost of wind? Has the cost of 

wind come down? Is it becoming more competitive, and do we have 

an opportunity to continue driving those costs to become competitive in a free market situation? 

I think the answer is yes, from our perspective, and at the right 

time, any policy—and I suggested it before—I think that over time, 

Congress and industry need to come together and figure out what 

the right time is, but I think there is value there and wind will become a good contributor to this country. 

Senator BINGAMAN. Senator Thune? 

Senator THUNE. Thank you, Mr. Chairman and Senator Cornyn, 

for holding this subcommittee hearing and to all of you for being 

willing to share your perspectives. 

I am interested in—I have supported renewable energy incentives, and I believe there is a growing realization on both sides of 

the aisle that Congress has to do a better job of figuring out a way 

of phasing out those incentives as industries grow and mature. And 

I would agree with what the chairman of the full committee, Senator Baucus, stated in an interview last week regarding the wind 

credit. 

He said, ‘‘The industry needs a little boost, but that boost can’t 

last forever. The more the industry can figure out a way to proceed 

by cutting back, phasing out, the better it would probably be.’’ 

Senator Baucus, I think, is, by and large, correct, and I hope that 

we can work together with the industry in a bipartisan way to find 

17 

a way to support renewable energy in a way that is fiscally responsible. 

So I guess my question is, to get back to what Senator Cornyn 

was honing in on there for a moment—and I would open this up 

to anybody who cares to answer it—it is the question of when to 

recognize when you hit that threshold of whether or not an industry is sustainable or viable without the benefit of whatever that incentive is. 

As you look across these energy industries, are there any benchmarks that you can use that would determine that or help determine that? 

Dr. ZYCHER. Well, indeed, there are. If a technology is on the 

threshold of becoming economic, there is no particular reason why 

the private capital market will not support it in the interim, and 

there is no reason for Congress to squander taxpayer dollars in 

pursuit of that last increment of competitiveness. 

If a technology is never going to be competitive, then, again, 

there is no particular reason for Congress to squander taxpayer 

dollars in pursuit of the impossible. 

So the argument that many have made that some technologies 

are close to being competitive, all they need is a little boost, is precisely wrong. If they are really close to being competitive and in 

need of only a small boost, there is no particular reason why they 

cannot go to the capital market for working capital to get them 

over the hump. And, if they are not close to being competitive, 

again, they should not get taxpayer support. 

Senator THUNE. Anybody else? Any specific benchmarks, anything? 

Mr. ZINDLER. Well, I guess, first, I would just respond to that, 

that the main thing we do in life is count dollars invested in clean 

energy. We have counted about $1 trillion invested in this sector 

and about a quarter of a trillion invested last year alone. 

So there are clearly those in the capital markets who are believers that this technology is right there knocking on the door of true 

cost competitiveness with its fossil generation rivals. And, in fact, 

our look at levelized cost of energy analyses suggests that, in some 

parts of the world, this technology and others, solar in particular, 

are already there, but that really market conditions do need to 

shift a little bit in the U.S. for wind to become more competitive. And as I mentioned, the $2.30 natural gas price that we have 

now is probably not sustainable, and, when it rises, wind will become more competitive, again, in part because the industry has 

been, in fact, driving down costs through technology improvements 

and also through scale. 

The industry has really grown tremendously in the last several 

years. 

Senator THUNE. If I might—this would be, I guess, for Mr. Purcell or Mr. Ragan. But as participants in the wind energy industry, 

how important—you have talked about certainty, and I do not disagree for a minute. Certainty is really important. 

We have a company called Molded Fiberglas in Aberdeen, SD 

that makes wind blades and employs hundreds of people, sitting 

there wondering what happens next in terms of in the incentives 

in this industry and what that is going to mean for investment. 

18 

But for participants in this, would a 2- to 3-year extension of the 

wind credit, even if the rate was phasing down, make a big difference in decision-making relative to a 1-year extension that is 

often done retroactively? 

If you had the certainty of a 2- or 3-year extension, even though 

that might be phasing down, is that better than this sort of yearto-year thing that we do today? 

Mr. RAGAN. Again, I will speak from TPI’s perspective, which is 

a blade manufacturer, like the company in your State, Senator. 

There is a long process, I have mentioned, to go from power purchase agreement to get orders, for the developers to place orders 

with our company for blades. We do not make VCRs or TVs; we 

cannot just turn our manufacturing lines back on the way other industries can. 

So, from our perspective, a longer-term PTC is very valuable for 

TPI, much more so than would be the on-again off-again and 1-year 

extensions. 

Mr. PURCELL. I guess I would echo those comments, not knowing 

what that ramp-down is that you are suggesting. But, certainly, a 

longer-term policy is, of course, best, and that is what we have had 

over the last several years, which has allowed my company and 

others that we serve to add investments in capital spent up and 

down, especially in areas like yours that you represent. 

So I cannot tell you specifically, not knowing what that rampdown would be, but, in general, yes, a longer-term view would certainly help. 

I think it is important to note, echoing Mr. Zindler’s comments, 

with regard to the technology and the advancements we have 

made, also having the local supply chain here, I would suggest 

that, if we do lose this, a lot of that just goes away and the investments that have been made over the last several years with the 

certain policy that you are talking about cannot be recapitalized if 

they are allowed to fail. 

So I think that that is important to note, that part of the cost 

out of this industry is because the supply chain is here local now 

in the U.S. as opposed to Europe or Asia. 

Senator THUNE. If I might just suggest, Mr. Chairman—and I 

have had this conversation with members of the wind industry in 

the past, and I know everybody says we want to wait for tax reform, this is going to get folded into tax reform, and I understand 

the logic behind that and I hope, frankly, that we get to tax reform 

and that we address all these things in a broader way. 

But I think anybody who can come forward with a specific proposal that would have that sort of a wind-down in it is going to be 

well-placed relative to those discussions about tax reform. And so 

far, we have not seen any proposal that would do that. I know that 

there are many of us who would be very interested in working with 

people who would be able to advance that kind of an idea. So I just 

would put that out there. 

And, again, thank you all for your testimony today. 

Senator BINGAMAN. Senator Carper? 

Senator CARPER. Thanks, Mr. Chairman. 

19 

Gentlemen, welcome. It is good to see you all. Thank you for joining us today and for your testimony and for your willingness to respond to our questions. 

I have a couple of questions, one for Mr. Ragan, one for Mr. Purcell, and I will let the other two slide for now. But here is my question. I want to focus a little bit, if we could, on offshore wind. And 

we do not do much onshore wind in Delaware, some, but not a 

whole lot. 

We have the potential for doing, I think, quite a bit of offshore 

wind. My colleagues have heard me tell the story—we tell the story 

of Goldilocks and the Three Bears, the story about the porridge 

that was too hot, the porridge was too cold, the porridge was just 

right. 

As it turned out, in some places off the East Coast, the wind does 

not blow enough, in some places it blows really too much, some 

places it blows just right. There is a place about 12 miles due east 

of Rehoboth Beach, DE where the wind blows just right much of 

the year, and there is some real strong interest in harnessing that 

wind and turning it into electricity. 

Mr. Ragan and Mr. Purcell, your testimonies focused on the importance of onshore wind production and the production tax credit 

to your businesses. However, we have started building offshore 

wind farms off our coast in this country. Could your businesses and 

other onshore wind manufacturers also benefit from those kinds of 

undertakings? And do you support the offshore wind industry’s efforts to develop in this country? Please. 

Mr. PURCELL. The answer is absolutely ‘‘yes.’’ We have the steelmaking capabilities in this country to support the types of equipment that need to go on the seabed floor and, also, above ground— 

excuse me—above the water. 

I think it is absolutely an important part of the wind solution, 

and it is something that we do support. And I think that there is 

room for that certainly along the East Coast, where we are going 

to need a lot of electricity generation for many years to come. 

So the answer, simply, is ‘‘yes.’’ We are supportive of the offshore 

business and, yes, we can be an integral part of that supply chain 

as well. 

Senator CARPER. Good. Thanks. 

Mr. Ragan? 

Mr. RAGAN. Senator, the answer is ‘‘yes.’’ In fact, TPI opened a 

small development factory in Fall River, MA not too long ago, first 

to build tooling and prototype blades for our facilities around the 

country. But more importantly, we see the opportunity and the potential growth in offshore, and that factory is also set in place and 

could be expandable when the offshore market takes off. 

But we would be able to build blades there, employ more people, 

and basically barge blades right off the river in Fall River. 

Senator CARPER. Thank you. Late last year, I held, along with 

some of our colleagues, a roundtable, a discussion with major offshore wind stakeholders, including several manufacturers. And 

during the discussions that we had there, there seemed to be overwhelming agreement that for offshore wind to be successful in this 

country, we needed a longer-term extension of the investment tax 

20 

credit for offshore wind, along with an extension of the production 

tax credit for onshore wind. 

And, if you support the development, and it sounds like you do, 

Mr. Purcell and Mr. Ragan, if you support the development of offshore wind, do you support a longer-term extension of the investment tax credit for offshore wind? 

Mr. Ragan or Mr. Purcell? 

Mr. RAGAN. Yes, Senator. The answer is ‘‘yes.’’ 

Senator CARPER. Mr. Purcell? 

Mr. PURCELL. Yes. The answer is ‘‘yes.’’ I think offshore is certainly coming very quickly behind onshore. But I think the immediate need would be the production tax credit, but we are also in 

favor of the ITC, as well. 

Senator CARPER. As it turns out, they are not going to build any 

offshore wind farms, as far as I know, without the investment tax 

credit. It just is not going to happen. 

Senator Snowe and I have suggested that, rather than just saying, ‘‘Well, we are going to extend the investment tax credit for another year or two,’’ what we do is change it up a little bit, and the 

first several thousand megawatts of capacity or production that are 

developed off of our shores would be eligible for the investment tax 

credit. 

I think we had 3,000 megawatts in our bill, but you could go up, 

you could go down, make it dialable to meet whatever revenue constraints we might have. So that is what we have suggested as a 

difference. 

The other question I have, and this would be for Mr. Zindler, if 

you would, sir, as of today, can you just give us some idea of how 

much offshore wind production we actually have underway in this 

country—in existence today offshore—and how much offshore wind 

there might be globally, just roughly, please? 

Mr. ZINDLER. Well, there are zero megawatts of—— 

Senator CARPER. Would you say that again? 

Mr. ZINDLER. There are no megawatts of offshore capacity operating, to the best of my knowledge. There may be a pilot project 

or two, as far as I know. I do not know the exact figure. I think 

it is a few gigawatts of capacity in Europe at this point. I can check 

for you and get back to you on that. 

But Europe certainly has moved quickly. China has begun to do 

some offshore development as well. So other countries have certainly stepped up on this stuff. 

I would make one comment, though, which is that it is hard to 

jumpstart an offshore wind industry. It takes substantial additional investment. A lot of the infrastructure that now is in place 

in Western Europe does not exist here yet in terms of the barges 

to put these things in and then manufacturing facilities. 

So the first one is going to be the hardest, no question about 

that. 

Senator CARPER. Great. Thank you very much. 

Could I ask just a quick follow-up, if you do not mind? 

Give us some idea what other countries, particularly those that 

are—what did you say, 4 gigawatts they are producing? What are 

some of the incentives for the offshore wind industry in that part 

of the world; any idea? 

21 

Mr. ZINDLER. Well, there are feed-in tariffs, first of all, which 

guarantee that the price—that the power is sold at a fixed rate. 

But the other—— 

Senator CARPER. Give us an example of a feed-in tariff, if you 

would. 

Mr. ZINDLER. So, if the power price is typically $50 per megawatt 

hour, if you are generating from a renewable source, you might sell 

it for $100. It is sort of an artificially inflated price that tries to 

take into account some of the externalities that are associated with 

coal generating and the polluting aspects of that. 

Those are not in any way accurate numbers—— 

Senator CARPER. I understand. 

Mr. ZINDLER [continuing]. But just to give you a sense. The other 

support that we have seen in Europe is, some of the development 

banks have been supportive of financing these projects, and that 

early is going to be a major issue for offshore. The amount of dollars that are needed—it is roughly 2, even 21⁄2 times the cost of onshore wind. In fact, you have more like 21⁄2, and even to 3. 

So the price check can be very, very high, and so you really have 

to raise a tremendous sum, and that is where sort of these quasipublic banks can come into play in the European sphere to help finance these. 

Senator CARPER. And is the rationale in Europe for actually 

doing a fair amount of offshore wind, is it that the wind is a more 

reliable source of generating capacity than maybe onshore? 

Mr. ZINDLER. I will not characterize exactly what the rationale 

is, but it is true that there are higher capacity factors that you get 

from an offshore project than you do from an onshore wind project. 

Typically, you can get up over 40 percent capacity factor, whereas 

you are usually in the 30s for an onshore project. 

Senator CARPER. Good. Thanks. Thank you all very much. 

Senator BINGAMAN. They have started a vote on the Senate floor, 

so I think we will have to adjourn the hearing. Thank you all very 

much for being here. I think it has been useful testimony. I appreciate it. 

[Whereupon, at 3:50 p.m., the subcommittee was adjourned.] 

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