US wind power, with tax help, could grow faster
Author: Timothy Gardner
"There are billions of dollars of investment waiting to pour into this industry if there are clear, longer term, signals about federal policy related to this industry," said Randall Swisher, head of the American Wind Energy Association (AWEA) by telephone from an Austin, Texas conference.
Last year, total U.S. wind power grew to nearly 4.7 megawatts (MW) or enough to power more than 1.3 million U.S. homes. But U.S. growth last year was only 10 percent compared to global growth of 28 percent. Wind makes up just a few percentage points of total U.S. electric production.
The slow economy paid a toll on wind growth, but a rocky credit transition also hurt it. A federal tax credit expired in late 2001, and the new credit was not signed into law until March of 2002.
The credit pays wind developers 1.8 cents for every kilowatt-hour of energy they produce and lasts for 10 years once locked in.
The sometimes months-long gaps that have occurred periodically since the credit was approved in 1994 have created a roller coaster in U.S. wind production growth, because companies become fearful of investing in the alternative energy source, said Swisher. The credit is set to expire on Dec. 31.
Late last year, leading wind turbine maker Vestas Group (VWS.CO) put off its decision to build a wind turbine plant Portland, Oregon because of the uncertainty of the credit. "Vestas is not alone," said Swisher. "There are many companies in that position."
A three-year extension of the credit is included in both the Senate and House versions of the energy bill now being considered, while a one-year extension is included in the Senate tax bill.
The sluggish economy and lack of transmission resources in the windiest locations, which are sparsely populated and far from major load centers, are also obstacles for wind growth.
"Unfortunately, the outlook for wind isn't completely rosy," said Linn Draper, CEO of AEP (AEP.N) the largest electricity producer in the United States.
"There are some obstacles that must be overcome if the U.S. is ever going to receive more than just a percent or 2 of its electricity from wind," said Draper. AEP now gets about 1 percent of its power from wind.
Anders Chritensen, CEO of leading Danish wind turbine producer LM Glasfiber said even if these problems are not solved immediately, it would be better to have a multi-year tax credit than not.
Swisher said Congress and the Bush Administration have been very supportive of wind power, but the way in which Congress has to renew the credit is not. "We had been innocent victims of a 'drive by shooting' back in 2001," said Swisher of the effect of credit expirations on the industry.
Earlier this month, AWEA cut its forecast for installed wind energy capacity in the United States in 2003 to 1,100-1,400 MW, compared to the earlier expected 1,500-1,800 MW. The estimated expansion to 6,000 MW is enough to serve about 1.5 million homes.