U.S. wind power industry feels a new breeze, may soon double

Source: Daniel Cusick, E&E reporter • Posted: Thursday, October 23, 2014

The U.S. wind power industry continued its modest recovery over the third quarter of 2014, with 419 megawatts of new generation capacity coming online in Texas, Nebraska, Michigan and California.

But officials said the quarterly numbers, which reflect a 600 percent increase over the same quarter of 2013 when the industry was emerging from a near-standstill, do not accurately reflect the pace of wind energy development in the United States.

While the industry has completed 19 wind energy projects accounting for just over 1,250 MW of generation capacity so far in 2014, the project pipeline for late this year and into 2015 is much larger, accounting for roughly 13,600 MW of capacity, according to the American Wind Energy Association.

If all those projects come online, wind energy in the United States will reach nearly 76,000 MW by December 2015, a more than doubling of capacity from just five years ago. The nation currently has 62,300 MW of wind power capacity, according to AWEA.

But for now, the wind power industry is taking satisfaction in small positive steps it has achieved since late 2012 and early 2013, when a key federal tax credit for the industry effectively expired, sending the industry into a deep tailspin marked by seven consecutive quarters of anemic growth, including just 2 MW of new installations in the first six months of 2013.

By contrast, U.S. wind energy developers installed a record 8,385 MW of capacity in the fourth quarter of 2012, just as the federal production tax credit (PTC) for wind energy was nearing its expiration under the 112th Congress.

The PTC received new life early in the 113th Congress and was subsequently updated to allow wind farms to qualify for the 2.3-cent-per-kilowatt-hour credit so long as they had entered a meaningful construction phase by the end of 2013 and were put into service by the end of 2015.

105 projects underway

But officials say the industry has been slow to regain its footing from its early 2013 collapse.

Emily Williams, AWEA’s director of data and analysis, said the slow recovery was tied to two distinct factors: the deep uncertainty around the PTC that lingered over the last six months of 2012, followed by the Internal Revenue Service’s decision to tweak the program in 2013, creating another layer of hesitation for developers and investors.

“This was an entire new world for the industry and for the IRS as well,” Williams said in a telephone interview. “There was a delay in projects getting up and running because people were still trying to understand what the new rules meant. Once those questions were addressed, we saw the industry respond very strongly.”

That strength is reflected in the 105 projects currently under development, especially in the central part of the country. Texas, for example, is expected to add 7,600 MW of new wind energy capacity over the next few years, solidifying its place as the nation’s No. 1 wind power producer. Other major projects are slated to come online in Oklahoma, Iowa, North Dakota and Kansas, according to AWEA.

Yet even with a brighter future ahead, there is no masking the industry’s recent slump.

Only one of the past seven quarters — the last quarter of 2013 — saw more than 1,000 MW of newly commissioned wind energy capacity. Its next-largest growth came in the second quarter of this year, with 619 MW, according to figures released this week by AWEA.

Lowered costs make ‘irresistible value’ for utilities

For now, leaders are focused on the industry’s strengths, including falling prices for turbines and equipment and the narrowing gap between the levelized costs of wind energy versus competing energy sources, including fossil fuels.

“With continued technological innovation, wind energy has become so affordable that it offers utilities and consumers an irresistible value,” Tom Kiernan, AWEA’s CEO, told attendees of an industry gathering for Wall Street investors in New York this week.

Kiernan cited Energy Department estimates showing that the delivered cost of wind energy will continue on a steep downward trajectory over the next five years.

Meanwhile, Democrats in Congress have introduced legislation that would extend the PTC again, at least through the end of 2015. But the bill faces an uphill battle in a lame-duck session where Republicans are expected to retain their majority in the House and possibly pick up seats in the Senate.

Conservatives have argued that states with large amounts of wind energy on their grids, when calculated as percentages of all generation rather than actual MW figures, have experienced rising electricity prices, and that federal tax credits have allowed the wind industry to effectively “hide” more than 20 percent of wind power’s actual costs.

Wind energy proponents have rebutted such claims, citing expert studies showing that states with large wind power portfolios have on average reduced costs for electricity consumers, and that utilities’ decisions to enter long-term power purchase agreements with wind farms prove that the resource makes economic sense.