One casualty of the payroll tax deal: clean energy

As we’ve reported before, the payroll tax cut and unemployment insurance aren’t the only items that would sunset soon if Congress didn’t agree to extend them.

The tax break for commuters who take mass transit has already lapsed. A production tax credit for wind power will soon come to an end. And a grant program that makes it easier for solar-panel makers to take advantage of an existing tax credit is set to disappear. There were a few efforts to include these items in the final payroll tax deal that Congress is set to approve this week. But, in the end, none of them made it.

Better hurry before the tax credit expires. (Ariana Lindquist/Bloomberg) The Chicago Tribune has an in-depth look today at how the end of the production tax credit will affect the wind industry. Projects that finish up by the end of 2012 will still qualify — which is why there’s likely to be a huge boom in construction this year. But that leaves a vast number of additional projects that weren’t slated for completion until 2013 or later. The tax credit will have expired by then, so those projects are likely to be shelved, which, according to the consulting company Navigant, will lead to 37,000 layoffs. (This production tax credit is different from the loans handed out to companies like Solyndra, in that companies actually have to be producing and selling power to get the subsidy.)

How big a deal is this? In Illinois alone, there are an estimated 13.8 gigawatts worth of wind projects in various stages of construction — enough to power some 3.3 million homes each year. “Many of those projects,” the paper found, “will be abandoned or significantly delayed without federal subsidies.” As long as the carbon impacts from fossil-fuel sources remain unpriced and unregulated, renewable sources like wind will have a tougher time competing on their own.

Now, there’s always the possibility that the clean-energy credits could come up for renewal when Congress takes up tax legislation after the November election — remember, that’s when the Bush tax cuts are slated to expire. But even so, that delay will have a significant impact on many wind projects (and possibly a few solar projects). Combine that with the glut of cheap natural gas that’s making the economics of wind and solar far more difficult, and renewable power is suddenly facing a rockier future.