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September 15, 2008

GE: Extend Clean Energy Tax Credits Or We’ll Go To Germany, China

General Electric Energy’s John Krenicki recently pleaded with senators to extend tax credits for renewable energy (see transcript below), which are set to expire at the end of the year. If they expire, Krenicki told Keith Johnson of Wall Street Journal that, “we’ll go to Germany and China.” Both countries have long-term plans to promote clean energy.

Krenicki says he is prepared to fly down every week and repeat his plea. Other executives, such as General Motors CEO Rick Waggoner, Shell Oil president Marvin Odum, and Goldman Sachs co-president Gary Cohn, are also requesting the extension of tax credits for renewable energy.

Last week, Dow Jones reported via AgWatch Network that the U.S. Senate unveiled a $40 billion package of renewable energy tax credits. The package includes a credit for capturing and storing CO2, and a new tax credit for nuclear energy production. The cost of the package is expected to be offset by new taxes on the oil and gas industry.

While the Senate is receptive, Krenicki says the real problem is the messy politics which make it harder to renew the credits.

Some readers of Johnson’s blog responded positively, but they also voiced some of their concerns. One reader wrote:

Good to see that some of industry’s heavyweights are rattling the cages of Congress. The only concern I have is that many of those named are part of the energy problem we need to address with innovative energy planning.

Here’s the full transcript of Krenicki’s remarks made at the Senate Energy Summit:

Senate Energy Summit

Friday, September 12, 2008

Opening Remarks
John Krenicki
Vice Chairman, GE
President and CEO, GE Energy Infrastructure

Thank you, Mr. Chairman.  I am John Krenicki, Vice Chairman of the General Electric Company and President and CEO of GE Energy Infrastructure.

I appreciate the opportunity to participate in this Energy Summit, and would like to commend you and Senator Domenici for your leadership in attempting to forge a bipartisan response to our current energy challenges.

GE Energy’s businesses offer a diverse portfolio of products and services in the area of fossil power generation, gasification, nuclear, oil & gas, water, transmission, smart meters, and renewable energy technologies such as wind, solar, and biomass.

I know policies for all of these technologies are of interest to you and your committee but today I would like to focus on just one in my opening comments  – the production tax credit for renewable energy.

By the time the gavel falls on the 110th Congress, the world will know the answer to a very important question: “Will the Congress and the US Government be a reliable partner in the quest for a cleaner and more secure energy future – or not?”

Since entering the wind industry in 2002, GE has invested over $700 million in technology, increased wind turbine production 6-fold, and tripled our US wind turbine assembly sites.  We’ve expanded capacity from 10 wind turbines per week to 13 per day, and we have grown renewable energy jobs at GE to more than 2,500.  GE has also tripled the number of its suppliers, who now cover 15 states and account for an additional 2,500 US jobs.  Last year we announced that two blade manufacturing companies would build new facilities in Aberdeen, South Dakota and Newton, Iowa to supply GE wind turbines, adding 1,250 jobs. The renewable energy tax credit is the foundation of this growth!

In 2002, when we entered the US market, wind energy added only about 1% of the new electrical capacity installed that year. Last year, 34% of the new electrical capacity was wind.

We’re proud to have an important role in one of the world’s most successful renewable energy policies. Mr. Chairman, you and your colleagues should be justifiably proud of that success.

Oddly, because of that success, the production tax credit’s future seems at risk.  For example, the Joint Tax Committee states that a yearlong extension of the production tax credit will “cost” the US Treasury 4 to 5 billion dollars?  Yet without a year extension of the production tax credit, most of the projected 7 gigawatts plus of new renewable power would be illusory. And most of the additional income from project taxes, payroll taxes, land lease taxes, and vendor taxes associated with the wind industry would not materialize.

But beyond the ‘green power’ and tax benefits to continuing this policy, there are consequences to inaction. According to a study last February, Navigant Consulting concluded that PTC expiration would place 76,000 jobs and more than $11.4 billion in clean energy investment at risk.

And there is a global dimension as well. The connection between a stable domestic policy and a vibrant export sector for renewables is exemplified by Germany, whose incentive system has earned it a reputation of the world’s leading ‘green’ power country.  Wind power technology is the country’s second-leading export industry after automobiles. Yet this year the United States, thanks to the PTC, will surpass Germany in electricity generated from wind energy.

How does the United States win by stumbling into an outcome that disrupts this efficient deployment of clean energy?

By extending the PTC, you will reaffirm the United States’ global leadership in the deployment of clean, carbon free, renewable energy – and send a signal that the US Congress stands ready to join others in addressing the more complicated problem of climate change.  We are ready to help.

Thank you again for the opportunity to participate in this Energy Summit.  I look forward to your questions

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