Wind power industry escaped doldrums of 2013, growing 7.4% last year 

Source: Daniel Cusick, E&E reporter • Posted: Friday, January 30, 2015

A flurry of wind farm completions in the closing months of 2014 helped the U.S. wind energy sector regain its footing after a near-collapse in 2013, with 4,850 megawatts of new wind power coming online over the 12 months ending in December, the American Wind Energy Association reported yesterday.

The 2014 annual figure represents a fivefold increase in year-over-year installations from 2013, when the industry commissioned just over 1,100 MW and suffered steep drops in both investment and jobs. The down year came after Congress allowed the industry’s primary federal tax credit to expire before renewing it in January 2013 for one additional year.

That political uncertainty of the 2.3-cent-per-kilowatt production tax credit (PTC) put a deep chill on domestic wind power development in 2013 that took nine months to thaw, resulting in one of the leanest growth years in its history.

By contrast, 2014 was a rebound year, according to AWEA officials, with cumulative wind power capacity rising roughly 7.4 percent, to 65,875 MW (65.9 gigawatts), over year-end 2013 levels and nearly 10 times larger than in 2004.

Of the 4,850 MW of new capacity added last year, 40 percent is contracted to utilities or other businesses via power purchase agreements, 33 percent is owned by merchant generators or has a “merchant hedge,” and 26 percent is owned directly by utilities, according to AWEA.

“The industry is coming on strong as a result of this most recent PTC,” Tom Kiernan, AWEA’s chief executive officer, said in a webinar yesterday morning with reporters and industry leaders. But he cautioned that the industry needs another long-term extension of the tax credit to avoid what he described as “going off the cliff again.”

“We believe we need a stable, reasonable and predictable policy going forward with respect to the production tax credit,” Kiernan added, something AWEA and its allies will continue to try to pry from a Republican-controlled Congress. One strategy is to attach PTC extender language to legislation aimed at moving the stalled Keystone XL oil pipeline forward.

But that may still be a heavy lift.

Republicans, who now control both chambers of Congress, have been critical of renewable energy tax credits and government-backed loans and grants, saying such programs reflect a misguided policy of government officials picking winners and losers for energy generation rather than allowing markets to sort out which are the most economical methods of producing electricity.

Renewable energy advocates counter that alternative energy sources, like wind and solar power, are still gaining their footing in an energy sector long dominated by fossil fuels, some of which have their own forms of government support.

They also argue that renewables offer key environmental and economic benefits that are worthy of government support, such as their reliance on “free fuel” from the wind and sun and their ability to generate electricity without direct releases of carbon dioxide or other greenhouse gases.

Poised to benefit from reduction of coal-fired power

In an interview this week with E&ETV, Kiernan pointed to the broader energy tax landscape and said wind energy is no different from oil and gas, nuclear, coal, and other traditional fuels when it comes to government supports.

“I think what’s important to remember is every other source of electricity in this country has their tax relief,” he said. “And this has been a policy of the U.S. for the last 100 years to encourage energy production by giving tax relief to different energy sources. The PTC is our form of support. We’re looking forward to having it extended” (E&ENews PM, Jan. 26).

As it stands, the wind power industry is moving cautiously into 2015 without its PTC, hoping to counter what could be another downturn in new projects with optimism that wind power has garnered enough support from utilities and other electricity buyers to help it overcome political and economic headwinds.

The industry is also poised to capture more of the electricity generation market as regulations shift around coal-fired power generation, most notably U.S. EPA’s Clean Power Plan rule that would cap greenhouse gas emissions for power generators. If it’s implemented, many utilities are expected to shift their generation portfolios away from coal toward natural gas, wind power and solar power.

Beth Soholt, executive director of Wind on the Wires, an advocacy group based in St. Paul, Minn., said that kind of market driver, along with improving efficiencies and declining costs for wind energy, could provide the kind of foundational support the wind power industry needs for long-term stability and growth. But, she added, “We’re not quite out of the woods yet.”

Jonathan Weisgall, vice president of legislative and regulatory affairs for Berkshire Hathaway Energy, the nation’s largest utility owner of wind farms, told the AWEA conference call that his company would remain bullish on wind power for the foreseeable future, noting its reduced risk from fuel price volatility, as well as a generally favorable cost profile for both constructing and operating turbines.

“We know what the 30-year horizon on price is for power from wind farms,” Weisgall said. “We can’t say that about gas plants.”

It helps, too, that Berkshire Hathaway’s two large utility holdings, MidAmerican Energy Co. and PacifiCorp, are in Iowa and California, the nation’s No. 2 and No. 3 states, respectively, for wind energy generation, behind Texas.

Texas, Oklahoma and Iowa lead growth

In an unrelated announcement, the Electric Reliability Council of Texas reported last week that wind power accounted for 10.6 percent of all electricity moving on Texas’ primary power grid in 2014, compared with 9.9 percent in 2013. Natural gas accounted for 41.1 percent of ERCOT’s generation mix, up 0.6 percentage point, while coal dropped from 37.2 percent in 2013 to 36 percent last year, according to ERCOT’s “2014 Demand and Energy Report.”

And Texas’ appetite for wind power appears to be showing little sign of waning. With more than 14,000 MW of installed wind energy capacity as of December, Texas outproduces most of the rest of the states combined. Its 1,800 MW of wind turbine additions just last year are greater than all of the wind power capacity in Indiana or New York, according to AWEA.

Other states that showed robust wind power growth in 2014 were Oklahoma (648 MW of additional capacity), Iowa (511 MW), Michigan (368 MW), Nebraska (277 MW), Washington (267 MW) and Colorado (261 MW). The national pecking order among states also shifted slightly, with Oklahoma topping Illinois for the No. 4 spot and Washington edging Minnesota at No. 7 for total wind power capacity.

The largest wind farm completed in 2014, according to AWEA data, was Invenergy’s 288 MW Miami Wind Energy Center in the Texas Panhandle, followed by the 267 MW Tucannon River project in Washington owned by Portland General Electric. MidAmerican Energy and EDF Renewable Energy also put into service the 251 MW Lundgren wind farm in north-central Iowa, one of five sites being developed under MidAmerican’s planned 1,050 MW expansion of wind power in the state.

While the future of the PTC remains in doubt, creating long-term uncertainty in wind power markets, officials projected that 2015 will remain a period of strong development progress as projects that began work in 2013 and 2014 see a scaling-up of construction activities.

In the second quarter of 2014, AWEA reported a record 14,600 MW of wind turbines under construction in the United States. That pace slowed only slightly in the third and fourth quarters. At year’s end, 98 wind farms were being built in 23 states, accounting for 12,700 MW of capacity, according to AWEA. The fourth quarter also saw an uptick in projects beginning construction, at 2,800 MW.

While figures on how many of those projects qualified for federal tax credits are not subject to AWEA’s reporting, Emily Williams, the group’s senior data analyst, said it was likely that most of the projects that entered meaningful construction last year would have applied for PTC benefits.