Wind power industry catches fresh economic breeze after tough half-year
During the second quarter of the year, no new wind turbines were built anywhere in the country, AWEA said, a circumstance few would have predicted one year ago, when the industry was riding a wave of growth that resulted in 13,000 MW of new generation being added to the grid in 2012.
Industry officials attribute the weak performance to a near paralysis that gripped the wind energy sector late last year as Congress allowed a production tax credit (PTC) of 2.2 cents per kilowatt-hour to effectively expire Dec. 31, before giving it new life Jan. 1 with the passage of legislation averting the “fiscal cliff.”
“The market pattern playing out in U.S. wind energy right now tracks exactly with warnings sounded by the industry a year ago, and with studies that examined the consequences of not extending the PTC,” AWEA CEO Tom Kiernan said in a statement. “No industry can contribute what it’s capable of giving America without stable policy, and wind energy is Exhibit A of that reality.”
According to AWEA, wind turbines currently account for 60,009 MW of generation capacity nationwide, only 2 MW more than at the end of 2012, or 0.00003 percent growth. By comparison, during the first two quarters of 2012, the industry added more than 1,900 MW of generation capacity, a 42 percent increase from the industry’s output at the close of 2011.
New deals make the future appear ‘robust’
But when the wind industry’s 2013 growth is measured by projects under development — rather than completed and in service — the numbers brighten considerably, according to AWEA. Data show that an estimated 1,300 MW of wind energy capacity is currently under construction, while an additional 3,600 MW is under contract between wind energy developers and utility buyers of that electricity.
AWEA characterized the industry’s recent recovery as “robust in areas that indicate impending project construction — namely, requests for proposals (RFPs) and power purchase agreements (PPAs).”
Among the largest utility wind energy PPAs announced so far this year are Xcel Energy Inc.’s recent plan to add 600 MW across its eight-state service territory and similarly large agreements completed by PacifiCorp, American Electric Power Co., Georgia Power Co., Austin Energy of Texas and Public Service Co. of Oklahoma.
And in May, Iowa-based MidAmerican Energy Co.,a subsidiary of Berkshire Hathaway Inc., the investment group founded and run by billionaire Warren Buffett, said it would expand its wind power holdings by 1,050 MW by the end of 2015 (ClimateWire, May 10).
Liz Salerno, AWEA’s director of data analysis, said those kinds of leading indicators suggest the wind energy industry is poised to regain the traction it lost in late 2012 and early 2013.
Bridging a 6-month gap
“The thing to note here is that utilities are buying more wind power than ever before,” Salerno said. “They see value of having 20-year contracts that provide electricity at lower costs than ever and that protect against volatility in fossil fuel prices.”
Moreover, Salerno noted that the last nine months — marked by a dramatic rise in wind power installations for the fourth quarter of 2012, followed by the collapse of the industry in 2013 — is the direct outcome of a dysfunctional market where participants made business decisions in an environment of speculation and uncertainty.
“The very reason we have a six-month gap in installations now is because no one could proceed with their long-term business planning for much of 2012,” she said.
AWEA’s optimism about future growth is buttressed by recent federal projections, which estimate that the U.S. wind energy sector could add as much as 20,000 MW of new generation by 2016.
The Energy Department figures, released in May, assume a robust industry response to the latest PTC provision, which allows developers to be eligible for tax credits so long as projects are under construction by Dec. 31, 2013, or as long as developers have spent at least 5 percent of the project’s total cost by year’s end.