Congress deals major blow to wind power industry

Source: JULIE WERNAU • CHICAGO TRIBUNE • Posted: Friday, February 17, 2012

CHICAGO – The wind industry is predicting massive layoffs and stalled or abandoned projects after a deal to renew a tax credit for wind production failed Thursday in Washington.

The move is expected to have major ramifications in states such as Illinois, where 13,892 megawatts of wind projects-enough to power 3.3 million homes per year-wait to be connected to the electric grid.

Many of those projects will be abandoned or significantly delayed without federal subsidies.

Illinois is home to more than 150 companies that support the wind industry. At least 67 of those companies make turbines or components for wind farms. And Chicago is the U.S. headquarters to more than a dozen major wind companies who wanted to take advantage of powerful midwestern winds and the fact wind power could be fed into the electric grid.

Industry lobbyists fought hard to strike a deal this week in Washington that would have included an extension of the production tax credit-which provides an income tax credit of 2.2 cents/kilowatt-hour for the production of electricity from wind turbines.

Wind proponents tried to tuck the tax credit extension in legislation aimed at extending payroll tax cuts, but congressional leaders did not include it in that bill.

There is still a possibility the extension for wind power tax credits could come through as a stand-alone bill or tied to other legislation. But Washington insiders say that is unlikely to happen before the election in November.

By then, the wind industry says it will be too late to avoid massive layoffs and project delays since wind projects slated for 2013 should be traveling their way down the supply chain now.

The tax credit doesn’t expire until the end of this year. But in order for developers to receive it, they must have their turbines up and running before year’s end.

That deadline has 2012 shaping up to be a banner year, as wind industry developers race to complete projects.

Few projects are slated for 2013. Developers say they either pushed projects back to 2012, or stalled those slated for 2013 because of the uncertainty over the tax credit.

Industry consultants say new capacity is likely to return to lows this country hasn’t experienced since 2004. Contributing to the bleak outlook for 2013: Competition from cheap natural gas and anemic demand for power as the economic recovery struggles to pick up steam.

“We simply have not seen that strong demand for new power generation,” said Daniel Shreve, director and partner of MAKE Consulting, a wind energy consultancy with an office in Chicago. “In the last four to five years, despite the fact that you haven’t seen tremendous load growth, new power generation is being added. Reserve margins have grown. We’re oversubscribed.”