Flurry of good news, but expiration of key incentive looms

This past week has been notable for a spate of positive news items on U.S. wind power development, although the looming expiration of a key federal incentive is casting an increasing shadow over the wind industry.

First, the good news:

– Despite some local opposition, the Vermilion County (Ill.) Board of Supervisors voted 21-1 to approve a proposal by wind developer Invenergy to install 104 turbines (approximately 160 MW) as part of a 214-MW wind farm (the balance of the project is planned for neighboring Champaign County).

– The New Hampshire Siting Evaluation Committee gave its approval to a proposed 48-MW wind farm proposed by Iberdrola Renewables in the town of Groton.  Construction on the project is expected to begin this fall.

U.S. Secretary of the Interior Ken Salazar signed off on Central Oregon's first major wind farm project, the 104-MW West Butte Wind Power facility proposed for private land in Deschutes and Crook counties.

Duke Energy announced plans for a new 131-MW wind farm, Cimarron II, in Gray County, Kans., with the electricity to be purchased by Kansas City Power & Light.

BP Wind Energy and Sempra Generation dedicated Colorado's newest wind farm, Cedar Creek 2, in Weld County, with more than 250 MW of generating capacity.  Cedar Creek's turbines include 60 2.5-MW Nordex units, which Nordex described as the turbine manufacturer's largest order ever.

Whew! Altogether, that adds up to roughly 750 MW, or enough to power the equivalent of 225,000 average American homes.  Quite a week!

Regrettably, it's not enough to dispel growing concern in the U.S. wind power industry about the impending expiration of the federal wind energy production tax credit (PTC), which is currently scheduled to end December 31, 2012.  While that date is still nearly 18 months away, the industry, the source of 35 percent of all new U.S. generation capacity over the last four years, is beginning to lose manufacturing and supply chain jobs now and those losses will continue through 2012.

After explosive growth in 2005 through 2008, domestic American manufacturing now produces some 60 percent of the content of U.S.-deployed wind turbines. To avoid significant manufacturing and supply chain job losses (and giving up the ground we have gained in “insourcing” wind equipment manufacturing jobs), the tax credit must be renewed with sufficient lead time.  Wind projects in the pipeline for 2013 and beyond will not, and cannot, proceed today due to:

– Lack of certainty with an impending expiration of the PTC, coupled with lack of movement on any national policy signal; and

– Lack of utility demand, which means continued depressed power and natural gas prices.

Without confidence in project activity proceeding for 2013, turbine orders, typically placed six to 12 months prior to delivery, are unlikely to be placed in 2012.  That causes a ripple effect: large turbine component manufacturers could see a peak of layoffs in the early to mid-part of 2012, with impacts and layoffs at subcomponent suppliers beginning earlier, in the second half of this year.

In short, the wind industry is making hay while the sun shines, but the urgency of a tax credit extension, to protect hard-won new American manufacturing jobs, is growing day by day.

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