Thoughtful analysis: Gauging the health of the U.S. wind industry

AOL Energy yesterday carried an insightful analysis by Felicity Carus of the outlook for America's domestic wind power industry. Its basic conclusion: the industry is extremely healthy now, but to stay that way it needs for its key federal incentive, the Production Tax Credit (PTC), to remain in place beyond its scheduled expiration at the end of 2012.

Ms. Carus's article is well worth reading in full. Some highlights:

The purpose of the incentive is being fulfilled.  The tax credit's purpose is to help the wind industry attract investment and grow, and in the process attract more competition and reduce the cost of electricity from wind power so that the industry can stand on its own in the marketplace. That's been happening over the past few years.

While a lot of progress has been made, the industry's not out of the woods yet.  A quote from Matt Kaplan, an industry analyst at IHS Emerging Energy Research, explains why the PTC extension is needed: “The industry is at a very interesting inflection point where technology and innovation are really helping to drive down the cost of wind substantially, But the problem is that the industry still needs the PTC to sustain a sizable level of build each year. Wind would have a very challenging time competing without the PTC, that much is clear.”

Certainty is the key issue. The companies that install and operate wind farms need a stable tax policy environment in order to make business plans, determine how much to invest, order turbines, arrange for construction, etc., and as the credit's expiration draws near, that period of stability is growing short. There is no lack of opportunity–one company spokesman notes, “We have massive amounts of land still that can be developed for power production and really good wind resource”–but without knowing what the financial playing field will be, companies will be forced to move to the sidelines.

More reading:

Wind power increasingly competitive and productive, new reports find, November 10, 2011
National lab report: Wind turbine prices drop as designs improve, U.S. supply chain develops, November 1, 2011
Nonpartisan report underscores need for stable wind energy policy: Threat of wind tax hike imperils thriving industry, October 3, 2011

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