Bradley Molinick started work at Gamesa’s wind turbine blade manufacturing plant in Ebensburg, Pennsylvania in 2006, before the plant was even finished.
“I was offered a job right out of the interview. I started January 30, 2006.”
Almost eight years to the day that he started, he was called into a conference room for a 7 a.m. meeting. It was supposed to be a teleconference with top managers from the company. But at the last minute came word that those managers had come to town for the meeting.
“They walked through the doors about 10 after 7 and introduced themselves, and said ‘Well, let’s just get right down to business.’”
They said the plant would be closing. The 60 or so people who worked there would soon be out of a job.
“I felt numb,” Molinick said. “Reality set in right then.”
Gamesa, a Spanish windmill maker, made the announcement just weeks after Congress cut off a key subsidy for the wind industry. At the end of December, Congress let the wind Production Tax Credit (PTC) expire, along with 55 other tax credits.
The company had come to Ebensburg with help from $15 million in tax breaks from the state of Pennsylvania in 2006. It built industrial-scale wind turbine blades, more than a hundred feet long. Some of the blades ended up on big wind farms nearby, in the hilly terrain of the southern Alleghenies. Many of these projects benefited from the PTC.
So in ending its subsidy of the wind energy, was Congress to blame for the job losses at Gamesa?
Using the Tax Code to Spur Green Energy
The PTC was started in 1992, and it gave wind farms a tax credit of 2.3 cents per kilowatt hour for the electricity they produced. On a typical residential bill of 8 to 12 cents per kilowatt hour, that can effectively lower wind costs by around 15 to 20 percent for customers.
The tax credit promoted wind because it’s a clean source of energy. It gives off no greenhouse gases, like carbon dioxide. Scientists say these gasses are driving climate change. The vast majority of wind energy in the U.S. has been installed with help from the tax credit. Wind now accounts for 4 percent of the national electricity supply. Liz Salerno of the American Wind Energy Association says that means less carbon dioxide is emitted from burning coal and natural gas.
“The wind energy fleet of turbines that is currently producing power today, they avoid about 100 million tons of CO2 annually,” Salerno said. That’s like taking 17 million cars off the road.
But the fact that this wind energy tax credit expired every few years made it especially vulnerable every time Congress wanted to cut the federal budget.
“It is an easy target,” said Constantin Samaras, assistant professor of Civil and Environmental Engineering at Carnegie Mellon University. “You can think of it as a billion dollar tax refund that the government doesn’t have to pay if the credit expires.”
And Congress has let it expire several times, each time resulting in a steep drop in wind farm construction. The last time was in December. A few weeks later, Gamesa officials gave workers at the Ebensburg plant the pink slip.
Among those losing his job is Ed Bernat. He started working at Gamesa in 2007, and for the last few years, he has been unit president for the United Steel Workers, which represents workers at the plant.
He’d seen the Ebensburg workforce decline from a high of around 250 just a few years ago to about 60 in January. Most of these losses came after the PTC expired at the end of 2012. Almost a year ago, Gamesa switched the plant from construction of new blades to a repair shop. Bernat says the jobs at Gamesa didn’t have to go.
“We felt betrayed because we did everything we possibly could to keep that plant up and keep it running,” Bernat says.
Joe Kline was a coal miner before he came to work in the wind industry. At 60, he’s not sure what he’ll do now.
“We lost good jobs. Jobs we were promised. This plant was going to be here for years and years and years,” he says. “Young people came [to Gamesa], were told they could retire from that company and it was taken from them. How do you face people like that on the floor?”
The union is upset because Gamesa is outsourcing some of the work that had been done in Ebensburg to TPI Composites in Juarez, Mexico.
Gamesa officials did not agree to a taped interview. But in an email, a company spokesman Frank Fuselier said most of its customers are now in the Southwest, not the mid-Atlantic. California and Texas are the two biggest wind producers in the country. The company said it would need to make the changes to stay competitive without the federal tax credit.
“The lack of a PTC presents a challenge for the whole wind industry,” Fuselier said. “Optimizing our supply chain is an important step to help us compete in a market without a PTC.”
Time to Say Goodbye to the Tax Credit for Wind?
The plant closing hurts the local economy in Cambria County, which has steadily lost population for the past 70 years. But to Doug Lengenfelder, a Cambria County commissioner, it comes as no surprise.
“It shouldn’t surprise people that when those subsidies go away the company has to remodel itself,” Lengenfelder says. Lengenfelder is a fiscal conservative, and is generally against tax subsidies for any type of business. But he saw the PTC helping his own county.
“For this county, that PTC meant jobs here in Cambria County. And, yes, I would have liked to have seen that extended,” Lengenfelder says.
On the other hand, Lengenfelder says the PTC already accomplished what it was supposed to—kickstart the wind industry. Wind mills dot the ridges around this old coal-mining county. Nationally, wind power has increased tenfold in 10 years.
Some in the wind industry agree. Jim Spencer is CEO of Everpower Wind Holdings, a wind company based in Pittsburgh that owns several windfarms in Pennsylvania. His business benefited from the tax credit, but he says the PTC may have run its course.
“You need a financial incentive when an industry is immature in order for the industry to get legs. And so I think the PTC has served its purpose,” Spencer says.
Spencer thinks life without the tax credit may actually lead to better results for wind.
“If we’re confronted with realities of making renewable energy work, and we don’t have what sometimes has been referred to as a crutch, assuming we’re really committed to renewables, then we’ll have to find a way which advances renewables in the state and creates a market for it,” he says.
Spencer thinks a far better way to encourage wind would be to make a national renewable energy mandate or to put a price on carbon emissions. But we don’t have these policies in the U.S.
Carnegie Mellon’s Constantin Samaras says for better or worse, the tax credit has doubled as a de facto climate policy. So deciding whether or not to extend it should address one simple question: “What is the cost of reducing greenhouse gases, and is this the most effective way?” Samaras says.
Even if the tax credit gets an extension later this year, the last day for workers in Ebensburg is March 31, 2014.