"This is what a successful business looks like with stable tax policy. Utilities are locking in a great deal for their electric customers while it's available. We're keeping rates down all across the US, even in the heart of the South," says Denise Bode, CEO of the American Wind Energy Association (AWEA), pointing to recent wind power purchases by the Southern Company in Alabama, Austin Energy in Texas, and Xcel in Colorado as examples.
The US wind industry installed just over 1,200 megawatts (MW) in the third quarter, and about 3,360 MW on the year so far – but has more than 8,400 MW under construction. That is more than in any quarter since 2008, as the federal Production Tax Credit has driven as much as $20 billion a year in private investment.
"This shows what we're capable of: adding new, affordable electric generation," said Bode. "Traditional tax incentives are working. There's a lot of business right now, people are employed, and manufacturers are looking to expand here in the U.S." The third-quarter results released this month by AWEA indicate the year will finish strong, somewhere between the industry's high point of 2009 and the recent dip in 2010 amid turmoil in federal tax policy.
Years of technological innovations and an influx of US-based manufacturing have driven down the cost of wind energy and saved further on transportation. Including incentives, which all forms of energy get, US wind is now close to cost-competitive with all other energy sources – even shale gas at today's unsustainable prices.
Dark clouds ahead
Even so, policy uncertainty has many leading wind developers saying they have no projects scheduled for 2013, which is starting to threaten both development companies and the US wind energy supply chain.
"In hard economic times we're delivering affordable power to ratepayers," Bode stressed. "A lot of people will be surprised by how inexpensive wind energy rates are now, because it's happened so fast." But she cautioned, "We could lose all these consumer benefits and a brand new, growing manufacturing sector if Congress allows the Production Tax Credit to expire."
Bode said she'll be asking lawmakers, "Do you want to raise rates on consumers in a bad economy by raising taxes on wind? Do you want to be the one to say that we just shut down a new manufacturing sector, and an industry that could support 500,000 jobs in less than 20 years, just as it was getting a foothold in the US market?"
Installations 79% higher year on year
Other highlights of the latest AWEA quarterly report include:
• The US industry during the third quarter installed 1,204 megawatts (MW) of electrical generating capacity versus 671 MW during the same period last year, up 79%.
• Year-to-date installations of 3,360 MW exceeds installations as this point in 2010 by 75%.
• In the third quarter of 2011, Colorado installed the most new wind capacity, with 501 MW; then Minnesota with 103 MW; Oklahoma with 130 MW; West Virginia with 98 MW; and Texas rounding out the top 5 states with 88 MW.
• Over 2,000 MW of new construction were started during the third quarter, bringing total under construction figures to over 8,400 MW, one of the largest under construction figures since the height in 2008.
• Significant under-construction numbers were reported in numerous states: More than 1,200 MW are under construction in California; more than 800 MW in in Oregon; over 700 MW in Oklahoma and Iowa; and over 600 MW in Illinois, Kansas, and Washington.
• The US wind industry now totals 43,461 MW of cumulative wind capacity, able to supply electricity to the equivalent of 10 million American homes and producing 3% of the nation's electricity through July of 2011.
Texas and Colorado success stories
In its report, AWEA cites a number of case studies, such as the success achieved in Texas, where Austin Energy was recently approved for new wind projects and authorized to negotiate for additional wind project contracts, which now have comparable costs to current natural gas power. The report highlighted that the new projects “are priced in the $35 to $45 per megawatt-hour range which is comparable to current and near-term pricing for natural gas power. These prices reflect a significant drop in power prices in general and in wind since 2008”.
Meanwhile, in Colorado, Xcel Energy's recent testimony on their Limon II wind power purchase agreement found that: "The net benefit (cost savings) of the Limon II PPA, over the entire 25 year term on a nominal basis, is projected to be nearly $278 million, or nearly $102 million on a net present value ("NPV") basis... These savings are a direct result of the very low wind prices currently available due to the expected expiration of the federal Production Tax Credit at the end of 2012…Since wind energy primarily displaces natural gas generated energy, reducing the quantity of natural gas purchases (displaced with fixed price wind purchases) acts as a hedge against future volatility of natural gas prices. By displacing natural gas with fixed priced wind energy, the Company has less exposure to potentially volatile natural gas pricing".
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