Industry presses for predictable policies after sluggish start to year

Source: Nick Juliano, E&E reporter • Posted: Friday, November 1, 2013

After a banner 2012 that saw more turbines installed in the United States than ever before, this year began with a whimper for the wind industry.

Over the first six months of this year, just one turbine began spinning — literally, a single turbine in North Dakota, providing a mere 1.6 megawatts of power. That’s just about a hundredth of a percent of the 13,000 MW installed last year.

Activity in the industry started picking up this fall, with about 68 MW installed between July and September, and wind farms capable of generating more than 2,000 MW are now under construction, according to the American Wind Energy Association. But the group says the sharp slowdown early this year following a brief expiration of the production tax credit demonstrates the influence the federal government has over the success or failure of the wind industry.

“Our No. 1 challenge is the uncertain, unpredictable policy environment in which the wind industry has to operate,” AWEA CEO Tom Kiernan told reporters today.

To combat that uncertainty, the industry is focused primarily on winning another PTC extension and on protecting state-level renewable portfolio standards, which create demand for wind power but have come under attack in recent years from conservative groups such as the American Legislative Exchange Council. Every ALEC-led effort to eliminate or weaken a state RPS was defeated last year, but conservative legislators in states like Ohio and North Carolina are expected to keep up the effort.

In an effort to find new policy tools that can aid the industry, AWEA also is urging U.S. EPA to include incentives for wind generation as part of its upcoming rule to limit greenhouse gas emissions from existing power plants.

“We think that can drive significant megawatts for the industry,” Kiernan said during a briefing on the industry’s third-quarter report.

AWEA next week will release an overarching agenda outlining its plan to double wind generation by 2020, and the EPA plan will be discussed in more detail there, Kiernan said. Aspects of the coming agenda include strategies to increase demand, reduce the cost of wind electricity, address implementation challenges, and reduce political and policy uncertainty.

The PTC won an extension in January, 24 hours after its expiration, but uncertainty over that outcome through the last half of 2012 dried up the pipeline of new projects that otherwise could have come online at the start of this year. A change in the eligibility requirements for the credit requires projects to merely be under construction, rather than finished, by the end of this year in order to qualify.

Kiernan says the eligibility change will prevent a similarly sharp drop in activity at the start of next year — which is good because he acknowledged it was “very, very unlikely” that Congress would extend the credit before then. But uncertainty beyond 2014 means another potential bust on the horizon unless Congress extends the PTC, which provides wind developers with $23 for every megawatt-hour of electricity they produce.

Whether that extension comes remains an open question. The focus for now is ongoing negotiations over comprehensive tax reform, although there is a growing sense across Washington, D.C., that that effort will not come to fruition by the time this Congress comes to a close.

AWEA has previously said it needs the PTC in place through at least 2019 as part of a broader tax reform bill, although the credit could become less generous over that period. That remains the industry’s position, Kiernan told reporters during a briefing this morning accompanying the release of the third-quarter report.

If comprehensive tax reform seems likely to fail by sometime next year, AWEA and its allies will turn their focus to winning another PTC renewal through a temporary “tax extenders” package, similar to the one that passed in January as part of a broader bill to avert the so-called fiscal cliff. Such packages typically include dozens of temporary tax provisions, such as the extremely popular research and development tax credit, and often are enacted just before the end of a two-year congressional session.

The industry’s performance is unlikely to top the record 2012 this year.

But there are clear signs of a resurgence in the third-quarter report, said Liz Salerno, AWEA’s chief economist. In addition to the 2,327 MW of turbines currently under construction, nearly 7,000 MW are expected based on long-term purchase contracts between utilities and developers or utility-owned projects, and even more requests for wind proposals have been issued by utilities.

On top of that, merchant projects in Texas are expected to bring online “potentially thousands of megawatts” over the next two years, she said.