Obama win may bring tax credit renewal, but wind turbine maker plans more layoffs

Source: E&E • Posted: Friday, November 9, 2012

President Obama’s re-election all but ensures the reinstatement of the production tax credit that benefits the U.S. wind industry, the chief executive officer of Vestas Wind Systems A/S said yesterday.

But employees at the Danish company won’t have much to cheer about, as the world’s largest wind turbine manufacturer announced it would cut an additional 3,000 jobs by the end of next year on top of the 3,700 it already eliminated this year.

The production tax credit (PTC), which pays 2.2 cents per kilowatt-hour for renewable electricity, expires at the end of the year. Obama has said he supports its renewal, while Republican candidate Mitt Romney has said he opposes renewable energy subsidies.

“We do believe, actually, that the PTC will be extended,” Vestas CEO Ditlev Engel said on a conference call with analysts and journalists yesterday. “There is a fair likelihood that the PTC will be extended, and if it goes through, as it is now being presented through the proposals on the table, it actually means that it will be close to a two-year extension. The way it is formulated now means that if you are 5 percent complete with a project in 2013, you will actually still get the tax credit after 2013.”

The PTC expiration would eliminate 37,000 wind jobs in the United States, or about half the industry workforce, according to the American Wind Energy Association. The subsidy was allowed to expire once before in 2003, which led to a 75 percent drop in new turbine installations in 2004.

“President Obama’s re-election provides cautious hope that not only will the PTC be extended, but also that a stable replacement policy will follow,” said MAKE Consulting, a Danish firm that works with wind industry companies. “Significant barriers, however, temper enthusiasm around Obama’s re-election: namely, a split Congress coming off one of the more ineffective terms in U.S. history and poor macroeconomic conditions that negatively affect demand for wind power.”

Whether the credit is renewed or not, Vestas announced yesterday new job cuts that will bring its workforce down to 16,000 by the end of next year from 22,700 at the end of 2011. Some reductions will come from selling facilities, others from vacant positions not being filled, but most will come from layoffs, as the company grapples with overcapacity.

Vestas can produce as much as 9 gigawatts of wind turbines per year but expects to ship only 5 GW worldwide next year. The Danish company has already cut 500 jobs at its four Colorado plants, where it used to employ 1,700 people.

Vestas lost €175 million ($223 million) in the third quarter and received orders for only 401 megawatts compared with 1,316 MW in the same period last year.

“However difficult it is to make further cost savings and also further reduce the workforce, it is simply necessary in order to create an even leaner and more agile Vestas to ensure the company’s continued profitability in a very uncertain and unstable wind turbine market,” Engel said.

Denise Bode, CEO of the American Wind Energy Association, said her group was pleased by the implications for the American wind industry in Tuesday’s votes. “We heard a lot about wind energy in this election, and it proved to be a winning issue because it is so popular with the American people. As just one measure, an overwhelming majority of the members supported by our political action committee, WindPAC, won their races.”

Overall, AWEA sees continued bipartisan support in Congress for extending the PTC to create incentives for $15 billion a year in private investment in U.S. wind farms, with support steady in the Senate and a net increase in announced supporters in the House.