Tail Wind Gives Wind Sector a Lift, For Now
Wind energy is getting a nice tail wind now that
the U.S. Department of Energy has released some info
showing that the sector has shown strong growth and
has created thousands of jobs. But the agency is
also forewarning that the expected expiration of
valuable tax incentives will, in turn, create new
head winds.
According to that analysis, 2012 was a banner year,
with wind energy becoming the number one source of
new U.S. electricity generation for the first time.
It represented 43 percent of all new electric
additions and has accounted for $25 billion in new
national investment, says the Energy Department.
Today, more than 80,000 people work in wind-related
businesses.
“The tremendous growth in the U.S. wind industry
over the past few years underscores the importance
of consistent policy that ensures America remains a
leader in clean energy innovation,” says
Energy Secretary Ernest Moniz. “As the fastest
growing source of power in the United States, wind
is paving the way to a cleaner, more sustainable
future that protects our air and water and provides
affordable, clean renewable energy to more and more
Americans.”
The numbers: Last year, 13,000 megawatts of new wind
capacity were added to the grid, which is nearly
double that of 2011, says the
Energy Department and the Lawrence National
Laboratory. Today, wind’s total capacity exceeds
60,000 megawatts, they add. At the same time, the
towers, blades and gears that are produced in this
country is growing, estimated at 72 percent of all
such parts. That compares to 25 percent in
2006-2007, they say. The Obama administration is
committed to doubling the amount of wind power that
now exists by 2020.
The states with the greatest wind energy gains:
Iowa, South Dakota and Kansas, with each accounting
for 20 percent or more of total electricity
consumption. Nine states, the analysis says, rely on
wind power for 12 percent or more of their total
annual electricity usage. Texas, though, is the
overall leader in terms of installed capacity,
adding 1,800 megawatts last year to its now 12,000
total megawatts. That’s twice as much as California,
which is the next highest state.
A separate report, released by the Energy Department
and the Pacific Northwest National Laboratory, say
that the “distributed” wind energy market that
provides power directly to homes, farms and
businesses also dramatically improved. In the past
years, this market has grown five-fold, they say.
Bargaining Chip
Future expansion, however, is uncertain. That’s
because the production tax credit is treated as a
bargaining chip that is traded for political gain.
On New Year’s Day, it was extended for two years and
is applying to those projects that have been started
this year, so that they can be completed using the
incentives.
In 2009, Congress extended the wind production tax
credit until 2012. Or, developers could instead have
taken cash upfront totaling 30 percent of a
project’s cost. The production tax credit is 2.2
cents per kilowatt hour generated for 10 years. The
American Wind Energy Association says that the
incentives have led to record growth in the wind
sector.
But the industry reps have also said that the on
again-off again nature of the tax breaks is causing
boom and bust cycles: Each time the credit has been
allowed to expire, economic productivity slows.
Critics contend that the credits do nothing more
than distort the market place, noting that wind
should be able to compete without them. At the same
time, the lack of sufficient infrastructure as well
as the array of environmental permits that are
required to build such transmission could thwart
wind energy's growth.
Moreover, “Because generation from sources may vary
over time ... it can cause difficulties for grid
operators who must maintain a constant balance
between generation supply and real-time customer
demand...,” says the
California Public Utilities Commission.
Industry, however, says that the tax credits are not
intended to be a permanent crutch, adding that they
have been necessary to improve turbine technologies
and to reduce the cost of wind development. To that
end, they are succeeding as the price of the blades
has fallen dramatically while their quality is
rising, resulting in greater electricity output. The
wind energy group also says that enough transmission
is in the pipeline that can handle pending wind
projects.
The wind industry, for the time being, can celebrate
its recent successes. But the hoorays will soon
quell given the pending political challenges,
forcing the sector to gear up, again, and make its
case to Washington and to the electorate.
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