The extension of production tax credits for users of wind energy that was approved in the Emergency Economic Stabilization Act will benefit several businesses in Arkansas.
Congress’ massive bailout bill, which passed in October, has provided economic relief for banks, insurance companies and eventually could include automakers.
It also had a section devoted to energy-production incentives. The bill extended until Jan. 1, 2010, the production tax credits for wind-related uses that were scheduled to expire on Jan. 1.
In the past year, four wind-related businesses have announced operations in Arkansas, representing about $ 270 million in investments and 2, 600 jobs.
After announcing last year plans to locate its North American headquarters in Little Rock, LM Glasfiber of Lunderskov, Denmark, already is making wind blades. Glasfiber eventually will hire more than 1, 000 people and invest about $ 150 million.
In October, Nordex USA Inc. said it would invest $ 100 million on a wind-turbine plant that should open late next year in Jonesboro and hire about 700 people. Also in October, Polymarin Composites, a Dutch windmill-blade manufacturer, said it and one of its suppliers, Wind Water Technology, plan to spend $ 16 million to renovate an empty distribution center in south Little Rock and create about 830 jobs over the next four years.
The production tax credits provide tax breaks to individuals and profitable businesses that make or use wind energy to produce electricity.
The absence of production tax credits was the main reason that the U. S. wind-energy market rapidly declined early this decade, Ralf Sigrist, chief executive officer of Nordex USA, said Friday.
Four years ago, when the tax credits were not renewed, construction in the industry almost stopped.
Even at times when the tax credit was available for only one year, it gave investors such a short amount of time to develop a wind-energy farm that banks often would not make loans, Sigrist said.
“At that time, that was the main reason for us not to go further into the U. S. market but to withdraw,” Sigrist said. “We just considered the U. S. market very unreliable. One year there would be a lot of megawatt construction [of wind farms ], the next year almost nothing.” The extension of the tax credits was an important issue to the wind-energy-related companies in Arkansas, said Scott Hardin, a spokesman for the Arkansas Economic Development Commission.
Frank Epps, who is overseeing development of Polymarin’s Little Rock plant for its parent company Emergya Wind Technologies, said at Polymarin’s announcement in October that the company would have moved forward with the project whether the credits were renewed or not.
But, Epps said, “historically every time the [production tax credit ] has been dropped, we have seen a dramatic drop in the deployment of renewable energy here in the United States.” For some projects, the tax credits make it worth doing, Nordex’s Sigrist said. But for other projects, it isn’t as important for there to be tax credits, he said.
With the current financial crisis, it is difficult to obtain financing, Sigrist said. Bankers are reluctant to make new financing commitments, he said.
The extension of the production tax credits in October increases the number of windenergy farms that would be profitable, he said. But the tax credits are not the driving and determining factor for whether every project should be built, he said.
Tax credits weren’t necessary to make the Jonesboro plant possible, Sigrist said. Nordex isn’t relying on any outside financing for the Jonesboro plant, but will fund what is necessary itself, he said.
“We may investigate whether there is a possibility to finance a portion of that, but it is not our plan that we have to rely on any external financing for the investment,” Sigrist said.
Sigrist said Gov. Mike Beebe may propose a bill in the next legislative session that could provide some sales tax exemptions and tax exemptions on revenue.
Hardin said Beebe is committed to pursuing legislation for Nordex that is similar to a package that LM Glasfiber received, possibly with tax breaks similar to what Sigrist described.
“Nothing has been drafted yet,” Hardin said.
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