Governors' Wind Energy Coalition

COPENHAGEN/FRANKFURT (Reuters) – The world’s largest wind turbine makers said a proposed Republican tax bill that would cut support for the industry in the U.S. would put its businesses and future investment at risk, in a rare public criticism on Friday of government proposals.

Equipment makers operating in the world’s second-largest wind turbine market have relied upon so-called production tax credits (PTC) agreed in 2015. In a new tax bill, unveiled late on Thursday, the PTC would be cut to 1.5 dollar cents per kilowatt hour (kWh) from 2.4 cents.

Shares in Denmark’s Vestas, the world’s largest maker of wind turbines fell as much as 12 percent on Friday, due to its large exposure to the U.S. market, where it overtook GE last year in installed capacity.

Shares in Siemens Gamesa and Germany’s Nordex, which also operate in the U.S. along with General Electric, were all down.

“Siemens Gamesa is disappointed in this step backwards. Our company is committed to this market and continues to invest in factories. A tax policy that has certainty is required for investment,” the group said in an e-mailed statement.

Vestas said the proposal was “disappointing”. GE said the group was carefully reviewing the details of the bill, which could still face changes as it needs to pass both the House of Representatives and the Senate.

SUPPORT WANES

The tax credit scheme was considered critical to enabling wind projects to compete with fossil fuel plants and the wind energy industry has said the proposed cuts put $50 billion in planned investment at risk.

The planned legislative step comes after long-standing industry concerns that Trump might curb support for renewable energy to promote coal and other fossil fuels instead.

“Even though Mr. Trump and team are not necessarily known for their adherence to the ‘usual’, we feel they are unlikely to be unaware of the wide-ranging consequences … of the government essentially breaking open private contracts,” Barclays wrote.

“After all, what would there be to stop them from retroactively doing so elsewhere too?”

Analysts at Goldman Sachs reckon that in this bear case scenario wind capacity expansion in the United States could fall sharply to a combined 10 gigawatts (GW) in 2019 and 2020, less than half the 26 GW it expects under its base case model.

The brokerage expects another consequence of the proposed PCT cut to be a fall in 2019 core earnings (EBITDA) at Vestas and Nordex of about 18 percent and 10 percent for Siemens Gamesa, whose market share has fallen in recent years.