With Congress at its back, wind power industry pushes ahead

Source: Daniel Cusick, E&E reporter • Posted: Thursday, January 3, 2013

The U.S. wind power industry received a New Year’s reprieve from what many expected to be a debilitating economic blow thanks to Congress’ last-hour legislation Tuesday averting a free fall over the “fiscal cliff.”

The tax-and-spending deal, expected to be signed by President Obama this week, allows all wind energy projects that break ground in 2013 to receive a 2.2-cent-per-kilowatt-hour tax credit. The production tax credit, which had been extended seven times since 1992, was slated to expire Monday, spurring widespread fear that the nation’s fastest-growing renewable energy sector would come to a grinding halt.

The PTC has been credited with helping to spur billions of dollars in private-sector investment, according to the American Wind Energy Association, and losing the credit was expected to dampen enthusiasm for wind power among energy investors and utilities that have added thousands of megawatts of wind energy to their portfolios in recent years.

Yesterday, AWEA and other wind power industry officials characterized the legislation as a lifeline for the industry, which had been girding for the worst even as it ferociously lobbied in Washington for a tax credit extender against stiff Republican opposition, particularly in the House of Representatives.

According to the congressional Joint Committee on Taxation, a one-year extension of the PTC would cost the federal Treasury about $12.1 billion. Such spending, combined with the fact that wind energy accounts for just 3 percent of the total U.S. electricity mix, has fueled political opposition to the PTC’s renewal.

But proponents have said the PTC is a net jobs and revenue generator, leveraging between $15 billion and $20 billion in annual private-sector investment since 2008. The PTC has also helped spark a domestic manufacturing boom, with turbine, blade, wind tower and affiliated manufacturers operating dozens of U.S. plants.

“America’s 75,000 workers in wind energy are celebrating tonight over the continuation of policies expected to save up to 37,000 jobs and create far more over time, and to revive business at nearly 500 manufacturing facilities across the country,” AWEA said in a statement.

The extension of the wind energy PTC, as well as investment tax credits for community-based and offshore wind projects, “will allow continued growth of the energy source that installed the most new electrical generating capacity in America last year, with factories or wind farms in all 50 states,” the group said.

Industry spells relief: P-T-C

One of the companies expecting to benefit from the one-year PTC extension is Texas-based Pioneer Green Energy, a 3-year-old firm with roughly 20 utility-scale wind projects in various stages of development.

Pioneer Green’s president, Andy Bowman, said in a telephone interview that the company remained confident the PTC would be renewed, but he acknowledged that “there was more uncertainty this time than there ever was in the past” as lawmakers kept the PTC and other tax extenders from a final vote until the evening of New Year’s Day.

“I’d say we took a gamble thinking it would get extended, and it looks like it paid off,” Bowman said. “There will be a number of projects that we can get off the ground, even in this small window.”

Paul Copleman, a spokesman for Iberdrola Renewables LLC, the Oregon-based subsidiary of Iberdrola SA of Spain and the nation’s second-largest renewable energy developer, said yesterday that discussions were under way “to see what projects might now be in a better position to move forward.”

Copleman did not specify how many wind farm projects in Iberdrola’s planning portfolio had been affected by the PTC uncertainty. He added that other energy market forces, such as low natural gas prices and shifting electricity pricing in some regions, were also factors in the company’s growth and development strategy.

“We had already indicated that all of our development in 2013 would be pretty selective and opportunistic, even with the tax credits in place,” Copleman said. “Obviously, we’re going to see if there are opportunities to take advantage of given this tax credit window. But it has to be consistent with our near-term business plan.

Last month, Iberdrola put the finishing touches on its 28.5 MW Hoosac Wind Power Project north of Pittsfield, Mass., near the Vermont border, capping a record year for wind energy installations in Massachusetts. The utility-scale project is expect to produce enough power for 10,000 homes and generate $6.8 million in annual tax revenue for local communities, according to a company release.

Damage done by months of uncertainty

While the eleventh-hour PTC extension will help keep the wind energy industry afloat, it did not ameliorate damage already done to an industry where investment activity shrank from robust levels at the end of 2011 to a near standstill by early December, when hopes for a stand-alone extension in the increasingly fractious Congress were nearly extinguished.

In the ensuing months, dozens of wind power companies, including turbine, blade and tower manufacturers, scaled back or even shuttered operations in the United States in anticipation of the expiring tax credit.

Vestas, the world’s largest turbine manufacturer, said yesterday that it expected a significant dropoff in wind turbine installations in 2013, even with the PTC extension. However, the industry will be stronger than it would have been if Congress had let the subsidy expire, the Danish company said.

“The one-year extension, which includes language to allow projects under construction by the end of 2013 to be eligible to claim the PTC after 2013, is critical to sustaining the U.S. market going forward,” the company said. “Vestas will work closely with its customers to meet the requirements.”

Vestas laid off hundreds of workers in the United States and put others on reduced hours last year as the PTC drew closer to its expiration date.

The company, which operates four plants in Colorado, said yesterday it will maintain its target of retaining 16,000 employees worldwide by the end of 2013, compared with 22,700 at the end of 2011. The company expects to ship only 5 gigawatts of turbines this year to customers. Vestas has a worldwide production capacity of 9 GW.

Colorado Sen. Mark Udall (D), a vocal proponent of extending the PTC, called this week’s legislation “a long-overdue dose of certainty” for the wind energy industry and Colorado communities where wind power has become a key employment sector, adding that the PTC extension should help create high-wage jobs and stimulate the manufacturing sector nationwide.

Wind energy officials also said they were pleased that the PTC extension makes the tax credit available to projects that begin construction in 2013, rather than those that are completed and connected to the grid by the end of the year. That provision helps account for the 18 to 24 months required to move a new wind farm from the permitting stage to completion.

But the industry’s euphoria over the PTC may be short-lived, one European analyst said.

“This is initially positive as it removes one of the big uncertainties for the U.S. wind market,” said Patrik Setterberg, an analyst at Nordea, Sweden’s biggest bank. “However, it should be kept in mind that the wind power industry in the USA still has to cope with extremely low natural gas prices.”