The U.S. wind industry added 2,151 megawatts of installed capacity in the first half of this year despite a bumpy economy. It was a 72 percent jump from 1H 2010’s 1,250 megawatts.
At the beginning of the 2H 2011, construction had started on another 7,354 megawatts of wind power capacity. It is the biggest single quarter “under construction” number since before the recession hit home in 3Q 2008.
Do these numbers herald the return of the 2006-to-2008 glory years? Or is there something going on behind the curtain?
According to Elizabeth Salerno, the American Wind Energy Association (AWEA) Chief Economist and Director of Industry Data Analysis, “Two pieces create the framework: The 1603 program, which means you need to be under construction this year, and the PTC [production tax credit], which means you need to be online by the end of next year.”
In December of 2010, Congress extended the 1603 program for another year, through the end of 2011. A part of the 2008-09 stimulus program, the 1603 program allowed developers who could get construction underway promptly to take the value of a project’s tax credits as an upfront cash grant.
Many installations that began construction in late 2009 or early 2010 under the terms of the 1603 cash grant program came online this year.
As another part of the stimulus, wind’s PTC was extended through the end of 2012.
Whatever electricity production developers bring online before the PTC expires will earn a 2.3 percent discount on federal taxes. This tax bill reduction can be transferred to investors. Wall Street and other players still raking in the big bucks despite the floundering economy are willing to buy into wind projects to get those tax credits.
The big “under construction” numbers are the result. "Most regions across the U.S. have more under construction activity today than was installed in all of 2010," Salerno said.
But there is much less activity scheduled for the beginning of 2013, Salerno said, because of uncertainty surrounding the PTC. Does that make the current upturn a bubble? Only if the PTC is not extended beyond 2012, Salerno suggested.
“All the other energy technologies have either a longer term tax credit or a permanent tax credit in place,” Salerno pointed out.
Denise Bode, AWEA’s CEO, continued to be optimistic about the industry’s hope for a PTC extension. "Wind tax credits enjoy broad bipartisan support, and since they're not spending programs, current projects are safe and prospects for the extension of the Production Tax Credit beyond 2012 are good," she argued.
“A lot of manufacturing and investment has gone into wind in the last five years,” Salerno said. The manufacturing sector of the industry has built over 400 U.S. facilities and employs over 20,000 people. That growth dramatically increased the estimated fraction of U.S. projects’ average wind turbine domestic content cost from 35 percent in 2005-06 to 60 percent in 2010.
“There’s a lot at stake,” Salerno said, “and more reason than ever before that we need a stable and consistent policy.”
But developers, not inclined to put much faith in a political process that has generally been undependable toward the wind industry and has let the PTC lapse three times in the last decade, are working as fast as they can to get what they can into the ground and online before the deadlines.
Despite unpredictability surrounding the fate of its PTC, the wind industry continues to achieve new levels of accomplishment. It has built 35 percent of the nation’s new electricity generating capacity over the last four years, more than twice what has come from new coal and new nuclear together.
Wind produced an average 3.2 percent of the U.S. electricity between January and April 2011 and remains ahead of schedule to generate 20 percent of U.S. electricity by 2030, a goal set during the Bush Administration and based on a DOE assessment of the nation’s resources and the industry’s growth potential.
And, Salerno pointed out, an authoritative report from energy consumer advocate Mark Cooper of the Vermont Law School showed that wind energy-generated electricity’s price, both competitive and consistent, “helps hold down overall prices for electricity” so significantly that, Cooper found, a utility would be irresponsible to its ratepayers if it did not invest in it.
In the current impecunious political climate, the 1603 program is not at the top of AWEA’s agenda. “Our focus is looking beyond that 2012 time frame,” Salerno said, “and getting the PTC extended for a longer period of time so there isn’t a cliff, a gap in policy. The industry could do a lot with a five-year extension in terms of scaling up, bringing down costs, securing that manufacturing base.”
Other 1H 2011 highlights include:
(1) 1,033 megawatts were installed in in the U.S. in 2Q, a 46 percent increase over 2Q 2010’s 709 megawatts;
(3) Ohio built its first utility-scale project (56.5 megawatts), Nevada started its first, and Maryland built its second (50);
(4) Between January and April 2011, Iowa became the first state to achieve the milestone of generating 20 percent of its electricity with wind.
The U.S. now has a cumulative installed capacity of 42,432 megawatts of wind power. Texas is first, with 10,135 megawatts, followed by Iowa (3,675), California (3,599), Minnesota (2,518), and Illinois (2,436).