Industry group credits PTC for strong 3Q installations

Source: Nick Juliano, E&E reporter • Posted: Friday, October 19, 2012

A report today from the wind industry’s main trade association highlights the link between stable tax policies and growth in turbine installations. Thousands of megawatts have come online this year, with even more expected to do so by the end of the year, but new project starts have slowed to a trickle.

More than 4,700 megawatts of wind turbines have been installed so far this year, including more than 1,800 MW in the third quarter, and an additional 8,430 MW are still under construction, according to the American Wind Energy Association’s third-quarter report.

“This is what a successful policy looks like when it’s working, but whether wind will continue to be a bright spot in the U.S. economy now depends on whether Congress acts to extend the Production Tax Credit by the end of the year,” Denise Bode, AWEA’s CEO, said in a statement.

Previous expirations of the production tax credit, which was first implemented in 1992, have been followed by sharp drops in wind installations, and the scenario this year is no different. Between July and September, wind developers started construction on less than 100 MW worth of projects, according to the report.

Because wind farms typically take 12 to 18 months to construct, uncertainty over whether the 2.2-cents-per-kilowatt-hour production tax credit will win an extension has thrown a wrench into planning efforts. Without the credit, new wind installations are expected to plummet next year, and AWEA says 37,000 jobs will be lost.

AWEA does not estimate how much of the 8,430 MW of projects currently under construction will be complete by the end of the year, but the fourth quarter likely will see a large increase in projects coming online if the patter from recent years holds. Since at least 2008, installations have spiked at the end of the year. For example, last year 3,446 MW came online between October and December, about as much as came online in the preceding nine months.

The report comes at least a month before Congress is likely to return to the question of whether to extend the PTC, with lawmakers remaining in recess until mid-November. Extending the credit has bipartisan support in both chambers, and a modified one-year extension was included in a Senate Finance Committee bill that was marked up this summer. The Finance Committee’s proposal would cost about $12 billion over the next decade. AWEA says the credit incentivizes about $15 billion in annual private investment in the wind industry.

But the credit’s fate may hinge on the elections, and questions continue to swirl around the industry’s long-term policy needs, including how the PTC could be eventually reduced or eliminated. Some lawmakers and congressional aides are growing frustrated with the lack of detail they are receiving from the industry on those long-term questions.

AWEA is holding a closed-door meeting today to discuss long-term strategy (Greenwire, Oct. 17).

Independent analysts project fewer installations next year, even if the credit is extended, because low natural gas prices are making it difficult for wind to compete in electricity markets and demand is slackening as state-level renewable portfolio standards are being met

In addition to the PTC, the wind industry’s growth also was aided by more efficient turbines, utilities agreeing to long-term power purchase contracts and increased U.S. manufacturing of wind components — nearly 70 percent of which are now sourced domestically, according to the report.