[Posted on March 28, 2008 - 12:00 PM]
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DiggDespite Al Gore's huffing and puffing, wind energy companies will require a lot more help from policymakers if they are to provide a relevant amount of electricity in the United States.
Unlike European utilities and wind companies, which have blossomed thanks to liberal energy policies, the U.S. wind industry has faced several potential and real detriments that have in many ways left it hobbled. Right now, the industry is looking down the barrel of a very real problem: the expiration of the so-called production tax credit.
One of the most important pieces of regulatory relief for the industry, the PTC provides a 1.5 cent credit for every kilowatt-hour of electricity wind plants produce during their first 10 years of operation and has encouraged establishment of both large-scale and smaller wind farms.
Legislation the U.S. House of Representatives recently passed would extend the PTC for wind power; it is set to expire on Dec. 31. Yet the bill faces longer odds in the Senate, where Republicans have stopped PTC legislation several times in the recent past.
"If you were to ask me a month ago, I would have said there was a 100% chance it would get extended," says Michael Bernier, a manager with Ernst & Young. "But as the days go by, there appears to be a deadlock with the House, Senate and president. It's more likely than not to get renewed, but the level of conviction I have is slowly eroding."
In years where the PTC has lapsed, the level of new wind installations has dropped dramatically. The last time this happened, in 2004, the level of wind megawatt hours installed dropped by 73%. Inconsistent federal policy on renewables has created a "starting and stopping" in the industry over the past eight years, says Edward Zaelke, managing partner at Chadbourne & Parke LLP.
Another major issue the industry faces is its inability to transmit power from large-scale wind farms to the locales that need it most. Electricity producers in windy states such as North and South Dakota have no ability to provide power to less windy, electricity-hungry cities like Los Angeles or Las Vegas, Bernier says. "The windiest spots and the best spots for wind farms are not where large-scale transmission lines are located," he says.
The problem is not technological or economic, says Robert Gates, senior vice president of commercial operations with wind turbine manufacturer Clipper Windpower plc.
"It's really the rules and regulations and laws that regard how power transmission lines get built that were set up years ago, when global warming and energy security weren't on the radar screen," he says. Large-scale wind farms would be the main beneficiaries of friendlier wind policies, but smaller projects also need assistance.
Some find help through companies such as Midwest Wind Finance of Minneapolis. Midwest Wind helps arrange financing for community-scale wind projects of between 10 and 20 megawatts costing between $20 million and $40 million and recently began raising funds to invest in development purposes.
Midwest Wind vice president Jeff Wright says projects that have gone through the approval process and received all the necessary construction permits typically don't have problems arranging financing. Problems securing wind turbines for smaller projects also have been alleviated as the industry has grown. "There are a lot of new entrants in the business," he says. "The turbine companies are betting with their dollars that the industry is going to boom now."
Yet larger scale installations face financial challenges, says David Drescher, a vice president with John Deere Renewables LLC. A unit of agriculture equipment maker Deere & Co., it develops and finances wind-energy projects on many of the same farms where its parent sells tractors. The company has 18 midscale wind projects of between 2 and 80 megawatts in operation in five states, and is constructing eight more this year.
Drescher says higher commodity prices and weakness in the dollar are driving up the cost of turbines and related components manufactured in Europe, where most big manufacturers are based. - David Shabelman
Unlike European utilities and wind companies, which have blossomed thanks to liberal energy policies, the U.S. wind industry has faced several potential and real detriments that have in many ways left it hobbled. Right now, the industry is looking down the barrel of a very real problem: the expiration of the so-called production tax credit.
One of the most important pieces of regulatory relief for the industry, the PTC provides a 1.5 cent credit for every kilowatt-hour of electricity wind plants produce during their first 10 years of operation and has encouraged establishment of both large-scale and smaller wind farms.
Legislation the U.S. House of Representatives recently passed would extend the PTC for wind power; it is set to expire on Dec. 31. Yet the bill faces longer odds in the Senate, where Republicans have stopped PTC legislation several times in the recent past.
"If you were to ask me a month ago, I would have said there was a 100% chance it would get extended," says Michael Bernier, a manager with Ernst & Young. "But as the days go by, there appears to be a deadlock with the House, Senate and president. It's more likely than not to get renewed, but the level of conviction I have is slowly eroding."
In years where the PTC has lapsed, the level of new wind installations has dropped dramatically. The last time this happened, in 2004, the level of wind megawatt hours installed dropped by 73%. Inconsistent federal policy on renewables has created a "starting and stopping" in the industry over the past eight years, says Edward Zaelke, managing partner at Chadbourne & Parke LLP.
Another major issue the industry faces is its inability to transmit power from large-scale wind farms to the locales that need it most. Electricity producers in windy states such as North and South Dakota have no ability to provide power to less windy, electricity-hungry cities like Los Angeles or Las Vegas, Bernier says. "The windiest spots and the best spots for wind farms are not where large-scale transmission lines are located," he says.
The problem is not technological or economic, says Robert Gates, senior vice president of commercial operations with wind turbine manufacturer Clipper Windpower plc.
"It's really the rules and regulations and laws that regard how power transmission lines get built that were set up years ago, when global warming and energy security weren't on the radar screen," he says. Large-scale wind farms would be the main beneficiaries of friendlier wind policies, but smaller projects also need assistance.
Some find help through companies such as Midwest Wind Finance of Minneapolis. Midwest Wind helps arrange financing for community-scale wind projects of between 10 and 20 megawatts costing between $20 million and $40 million and recently began raising funds to invest in development purposes.
Midwest Wind vice president Jeff Wright says projects that have gone through the approval process and received all the necessary construction permits typically don't have problems arranging financing. Problems securing wind turbines for smaller projects also have been alleviated as the industry has grown. "There are a lot of new entrants in the business," he says. "The turbine companies are betting with their dollars that the industry is going to boom now."
Yet larger scale installations face financial challenges, says David Drescher, a vice president with John Deere Renewables LLC. A unit of agriculture equipment maker Deere & Co., it develops and finances wind-energy projects on many of the same farms where its parent sells tractors. The company has 18 midscale wind projects of between 2 and 80 megawatts in operation in five states, and is constructing eight more this year.
Drescher says higher commodity prices and weakness in the dollar are driving up the cost of turbines and related components manufactured in Europe, where most big manufacturers are based. - David Shabelman
