Developers of Wind Farms Run a Race Against the Calendar
WASHINGTON — Forget about parties, resolutions or watching the ball drop. To Iberdrola Renewables, New Year’s Eve will mean checking on last-minute details like the data connections between 169 new wind turbines in New Hampshire, Massachusetts and California and its control center in Portland, Ore.
All over the country, developers are in a sprint to get new wind farms up and running before Tuesday, when the federal wind production tax credit will disappear like Cinderella’s ball gown. After that, the nation’s wind-farm building will be at a virtual standstill.
The stakes of meeting the deadline are enormous. Wind turbines that are connected to the grid and in commercial service before midnight on New Year’s Eve are entitled to a 2.2 cent tax credit for each kilowatt-hour they generate in their first 10 years, which comes out to about $1 million for a big turbine. As it stands now, those that enter service on Jan. 1 or later are out of luck.
The deadline is a bit like the April 15 one for filing income taxes, but “there are no extensions here,” said Paul Copleman, a spokesman for Iberdrola. To reduce the risk of missing it — a risk that increases when managing construction projects on mountaintops in New England in the winter — the company allowed more than a year for what are normally nine-month construction projects.
More than just individual projects are at risk; the wind industry says it expects installations to decline by 90 percent next year, with the loss of thousands of jobs. The erratic pattern of wind subsidies has spawned a boom-and-bust cycle, with supplier companies building factories that run at full production for months and then shut down when demand collapses.
The industry has long experience with drop-dead deadlines: since the tax credit began in the early 1990s, it has expired three times, said Elizabeth A. Salerno, director of industry data and analysis at the American Wind Energy Association, a trade group based in Washington. Each time, new installations fell from 73 percent to 93 percent, according to the association.
Congress, which last renewed the credit as part of the 2009 fiscal stimulus package, balked at an extension this year. Opponents argue that the money spent so far, about $14.7 billion, is enough, and that a renewal could cost about $12.2 billion were it to last for 10 years. They also complain that the credit allows wind machines to be profitable even when there is a surplus of electricity and the market price for it falls to zero.
The tax credit could be equal to one-sixth to one-half of the revenue from the wind turbine, depending on electricity prices in the area of the generator.
Wind advocates say that the wind production tax credit did not cost the taxpayers any money, because it stimulated economic activity, in the form of manufacturing and construction, that was taxed at the federal, state and local levels.
Iberdrola’s wind farm near Rosamond, Calif., with 126 turbines, opened last week. The company said it was “extremely optimistic” that its 19-turbine farm in Monroe and Florida, Mass., and a 24-turbine farm in Groton, N.H., would be up and running by Monday night, but declined to say precisely when.
According to the Energy Information Administration, the statistical arm of the Energy Department, wind developers were planning to install 12,000 megawatts of wind capacity this year, but as of Nov. 30, only about 6,000 megawatts had been completed.
The remaining 6,000 megawatts works out to more than 3,000 turbines: if they are all operating by late Monday night, the wind industry will have added 12 percent to its capacity in a single month. (A megawatt is the power required by, say, everything in a full-size Walmart with an included supermarket. Over the course of a year, however, a turbine produces only about one-third of its theoretical maximum capacity.)
Iberdrola did not disclose the price of each wind farm, but the industry average is about $2 million per megawatt, meaning that the three projects may have cost a total of more than $500 million.
Wind advocates say they will seek to revive the tax credit when a new Congress convenes next month, but it will not be at the top of Congress’s agenda.
With the tax credit due to expire, few developers are now taking the early steps required to establish a wind farm, like negotiating deals to sell the power and ordering the equipment. Mr. Copleman, the Iberdrola spokesman, said his company had a variety of projects “at various stages” but was “unlikely to be pouring any concrete next year.”
For projects being wrapped up now, Ms. Salerno said, developers lined up power purchase agreements with utilities and then arranged financing a year and a half to two years ago, with the economics predicated on the tax credit.
The start-and-stop pattern of recent years has repeatedly affected companies up and down the chain, especially the highly specialized ones that make towers, blades and generators. Robert Thresher, a wind expert at the National Renewable Energy Laboratory, in Golden, Colo., said manufacturers were “trying to run down their inventory so they wouldn’t be caught holding turbines” after the market collapsed in January.
A study commissioned by the wind industry predicts the loss of 37,000 jobs as a result of the credit’s expiration. For example, the Spanish company Gamesa, which built the giant blades for the New Hampshire project at its factory in Ebensburg, Pa., has announced the layoffs of more than 150 workers.
Some members of Congress have proposed that the credit be renewed, perhaps with a phaseout over a few years. A one-year extension would be of little use: Ms. Salerno said it would not give developers enough time to get new projects financed, built and put on the grid before the expiration date, even if they had already completed environmental studies and obtained the various permits required.
A one-year extension would work for developers, she said, but only “if you knew 24 months ahead of time that this was going to happen.”