Lisa Linowes | Wind Action | November 4, 2013
The U.S. wind power market staggered this year adding less than seventy (70) megawatts of new wind in the first three quarters. This is down from 4,743 megawatts installed during the same period in 2012.
Only three states reported wind expansions:
- California – Pattern Renewables added 42.7 MW to its controversial Ocotillo Wind Energy Facility;
- Colorado – Tri-State expanded its Colorado Highlands Wind Farm by 23.8 MW; and
- Alaska – Just 2 MW added.
The American Wind Energy Association (AWEA) wasted no time blaming the precipitous drop in installations on uncertainty surrounding the wind production tax credit (PTC), the federal incentive most often credited for market growth in the sector.
That’s a convenient excuse that might resonate with sympathetic members of Congress, but it’s not accurate.
Wind’s Bubble Bursts
AWEA’s CEO Tom Kiernan bellyached last week that his people were exhausted by the “boom-bust” behavior sparked each time the industry faced possible withdrawal of the PTC. He showed no remorse that big wind was still economically impotent despite decades of public handouts meant to stimulate self-growth. Instead he dug in and insisted the PTC be extended.
This is indicative of an industry that’s been coddled for too long and asked to show little in return. And why should it?
Every megawatt-hour generated by an eligible project during its first ten years of operation earns the production tax credit regardless of the location of the plant, the time of day and year when the energy is produced, or whether the energy is even needed. At $23/MWh, the PTC on a pre-tax basis ($35/MWh) equals or exceeds the wholesale price of electricity in many parts of the country. NO other form of reliable electric generation receives a federal subsidy as generous and condition-free as the PTC.
But wind didn’t falter in 2013 because of Congressional indecision.
We’ve long known that Section 1603, the cash grant program enacted under The American Recovery and Reinvestment Act of 2009 (ARRA), fueled a wind bubble that was certain to burst, and it did.
Under 1603, roughly 30,000 megawatts of new wind was installed, more than doubling the wind capacity in the country. As much as 90% of the 13,000+ MW of wind installed last year alone can be attributed to Section 1603, not the PTC.
In order to receive the grant, projects needed to be in-service by the end of 2012. Developers raced to meet the deadline which flushed the industry’s project pipeline. It will take several years before additional proposals reach the shovel-ready stage.
Forecasting Wind Growth Based on RFPs
Despite no growth, AWEA touted the rosy potential for new wind development by pointing at the number of utilities announcing RFPs (requests for proposal) for new renewables this year. Over 4,000 MW of new wind proposals are pending according to the trade group.
But RFPs and/or signed power contracts for the energy do not mean facilities will be built.
Consider the situation in New England as an example.
In September, four utilities in the Commonwealth of Massachusetts announced joint contracts to acquire 565 MW of new wind capacity from six wind projects to be sited in Maine and New Hampshire. Of the six projects, only one (Oakfield) has been approved for construction but the permit is under appeal in U.S. Federal Court.
Of the remaining five, one was withdrawn (Fletcher Mountain), and two (Passamaquoddy Wind Project and Peskotmuhkati Wind Project) were reported in breach of the utility contracts for failure to deliver the required development security payments.
Another (Bingham) was informed in August of serious environmental concerns by the Maine Department of Inland Fisheries and Wildlife. And the one New Hampshire project (Wild Meadows) is experiencing intense opposition from environmental groups and the host and surrounding communities. At this point, it’s not clear whether any of these projects will be built.
There are many other project proposals in the U.S. we can point to which are equally speculative but are likely still included in AWEA’s rosy forecast.
Other Challenges in the Wind
There are other significant challenges facing wind development which will make adding new projects more difficult. These include the lack of transmission capacity, record-low natural gas prices, and a growing, more organized public opposition to the towers.
Press reports about wind are increasingly negative and the PTC is starting to sound less like government ‘investment’ and more like corporate cronyism and government waste. Investors are rightfully worried about an industry that is subject to the whims of Congress and public opinion.
We are also learning lessons from the European Union which is several years ahead of the U.S. in terms of wind deployment.
Last month, CEOs from ten utilities in Europe responsible for nearly half of the energy capacity in the European Union argued for an end to wind and solar subsidies which they say are driving up energy prices for consumers and destroying Europe’s competitiveness. E.ON CEO Johannes Teyssen commented that the “subsidies are reaching a level which is totally unbearable. … This industry is the biggest kid on the block now, not a child any longer. And no longer needs a child’s nutrition.”
We agree!
Related articles
- Wind tax credit could be blown off (politico.com)
- BigWind moves to the back of the handout line (saveourskylineohio.com)