Oregon: Slack times in local wind energy industry
by: PAMPLIN MEDIA GROUP: JAIME VALDEZ – Art Sasse, communications director for Iberdrola Renewables in Portland, walks by wind turbines at the companys Klondike wind farm near Wasco, Ore.
Oregon’s wind industry has stabilized since Congress extended a key federal tax break in January, but no new wind energy developments are expected this year after a record-breaking number in 2012.
As Congress dawdled while a critical production tax credit was set to expire Dec. 31, wind companies raced to complete projects — while laying off staff in case the tax break wasn’t extended.
“Everybody had to start the 2013 year as if it weren’t,” says Art Sasse, communications director for Iberdrola Renewables in Portland.
New wind energy projects were frozen, along with orders for turbines.
During the year-end flurry, Oregon rose to the top five states for wind energy production, and welcomed the nation’s second-largest complex at Shepherd’s Flat — just as the two multinational wind companies with Portland regional headquarters were shedding staff.
Iberdrola Renewables, the North American arm of a Spain-based energy giant, laid off about 25 people last year, shrinking to about 375 employees. Vestas, the Danish wind turbine maker whose North American headquarters is blocks away in Northwest Portland, shrank to about 250 employees here, down from nearly 400.
Spokesmen for both companies say Congress eased the pressure for more layoffs when it passed a one-year extension of the production tax credit as part of the “fiscal cliff” package.
“I definitely think things have stabilized,” says Andrew Longeteig, Vestas spokesman in Portland.
“Everybody’s kind of holding steady these days,” Sasse agrees.
However, the “11th-hour, one-year-only deal” made it hard for developers to leap into new projects, Sasse says.
Making wind competitive
The tax break cuts customers’ price for wind power more than 2 cents per kilowatt hour, making it more competitive with energy from carbon-spewing fossil fuels.
Congress allowed companies to capture the tax break for projects spilling into 2014 if substantial construction is finished this year.
However, federal rules for the new tax break didn’t get finalized until springtime, Sasse says. New wind projects typically take longer than a year to build, he says, and utilities that buy wind power make plans a few years in advance.
As a result, the tax break extension “didn’t really have much of an impact,” Sasse says.
Iberdrola doesn’t expect to start building its two already-approved Oregon wind turbine projects this year, he says. However, the company may break ground on projects in California, Texas and the Northeast, where market conditions are riper.
Extension of the tax break may have helped Vestas land a deal to sell its U.S.-made wind towers to another company, the first time it’s done that for a third party, Longeteig says. “It’s a new foray of diversifying our business a little bit,” he says.
Vestas has been ailing in recent years, dropping from more than 23,000 employees worldwide to about 17,000. But it turned a profit each of the past three quarters, and is now halfway through a planned two-year turnaround, Longeteig says.
Oregon produces more than 5 percent of the nation’s wind energy, some 3,153 megawatts of electricity if the wind blew all the time. There’s more than that in the pipeline.
“There’s nearly 3,200 megawatts of wind right now that’s going through the siting process,” says Diana Enright, Oregon Department of Energy spokeswoman.
However, no Oregon projects are expected to commence construction in 2013.
“I’m not aware of anybody putting a shovel into the ground or putting a turbine up this year,” Sasse says.
One reason: The production tax incentive expires again in six months, and the industry faces the same uncertainty it faced last year.
“It’s hard to make these kinds of investments when you have that short time frame,” Enright says.
Another factor is California’s aggressive Renewable Portfolio Standard, which obligates utilities to supply an increasing share of their electricity from renewable energy. California added a new requirement that wind turbines be based in-state, eliminating a niche for Oregon developers selling power down south.
Portlanders to get more wind
Rachel Shimshak, executive director of Renewable Northwest Project, points out one new project expected this year with an Oregon connection. Portland General Electric announced last month it acquired the rights to a 267-megawatt wind project northeast of Walla Walla, Wash
PGE was soliciting proposals to provide it with more renewable energy, and in the right place at the right time to take advantage of the production tax credit, Shimshak says. Renewable Northwest Project, based in Portland, calculated the tax break will cut PGE’s cost by $253 million.
“Their customers will be the beneficiaries,” Shimshak says.
She says it’s a good time for companies to build more wind projects. The Environmental Protection Agency may push for lower carbon emissions at coal plants, fueling a demand for more wind power.
However, there’s also a lot of uncertainty.
The Umatilla Electric Cooperative is pushing a state ballot initiative that would water down Oregon’s Renewable Portfolio Standard by allowing utilities to count hydro power built long before the standard was enacted in 2007.
Wind industry supporters are pushing different ideas before Congress, which could make it harder to get anything enacted. Some want to extend the production tax credit for multiple years, while others are pushing to use real estate investment trusts or master limited partnerships for wind turbine projects. Others have discussed phasing out the production tax credit after several more years, to give the industry time to achieve price parity with fossil fuels.
Shimshak complains that subsidies for fossil fuels seem to be permanent, whereas wind and other renewable energy incentives are off and on.
As long as that occurs, she says, “it causes a lot of boom and bust.”