… Might as well try and tax the wind

Apologies to Dylan, but while pondering recent taxation maneuvers around the globe in renewable energy, the lyrics to his song Catch the Wind were blowing through my head. Investment Tax Credits (ITC) appear to be holding up in most countries, to the benefit of wind and solar power industry players; even as governments map out new taxation of output. So, what’s given to these pioneer entrepreneurs up front in the form of ITCs will be partially recouped, starting when the first turbine spins. That is where taxing the wind comes in… expect to see generators forking over to their local taxing districts a direct payment based on the electricity production from the wind turbines. Is it fair to tax the wind? Sure – petroleum exploration and refinery companies and providers of hydroelectricity have been subjected to the same tax obligation, while converting the natural elements into vital power output.

My expectation, though, is that renewable energy ITC policies should in fact render more after-tax revenue for providers than those policies that benefit petroleum-based energy providers. A nascent industry needs a boost, for a pre-defined period of time. Healthier after-tax margins will serve as a sign that these amazing new ventures around the globe are open for business and here to stay, which will attract ever-ready venture capitalists and mutual fund portfolios. There is already in play a multi-tier global industry: from land developers to manufacturers of specialty control equipment. The industry has drawn the most unexpected players, too, such as Knight-Carver, who’s made the delightful transition from design and construction of racing yachts to specialty wind blades. Their operations can be found today on both the San Diego bay front and on the South Dakota prairies.

Renewable energy programs are also becoming a local asset touted by regional economic development offices around the world, signaling a stable, diversified base for companies in search of a home. It’s the availability of, and the ability to generate, renewable energy that’s attracting companies in manufacturing, distribution and transmission of renewable energy and its components. A truly global industry is arising, with both mighty and emerging countries competing equitably. And it allows even perennially rainy spots like Portland, Oregon to tout themselves as a Solar City USA.

All governments will of course tax the wind — that’s a given. But they must keep their eye on the global competitive roadmap, mindful that companies can choose to locate most anywhere on the globe and easily reach customers everywhere.