feeling winded

Why the US wind boom is going bust

May 20, 2013
Obsession
Energy Shocks
May 20, 2013

Is the US wind boom over? It certainly looks that way. Wind energy installations plunged 80% in the first quarter to 384 megawatts (MW) from a year ago. That’s the lowest level in seven years and a massive drop from the record 13,329 MW that came online in the fourth quarter, according to a report from energy research firm SNL.

The crash reflects the whiplash plaguing the industry after the US Congress let a crucial renewable energy incentive expire at the end of 2012. Wind companies rushed to bring as many turbines online by the end of the year as possible so they could qualify for the production tax credit, which pays 2.2 cents per kilowatt-hour of electricity generated by wind farms during their first decade of operation.

Congress resurrected the tax credit in January for another year, but it was too little too late. The industry had already begun to lay off workers and scale back manufacturing capacity.  And don’t expect wind companies to go on a building spree this year, now that the tax credit has been restored. Its latest version only mandates that developers merely break ground in 2013 on projects, rather than complete them in the calendar year, as previously was required.

Utilities in big wind states like California are also beginning to meet government mandates to obtain a certain percentage of the electricity they sell from renewable sources. (California, for instance, requires utilities to meet a 33% renewable energy target.) The shale gas boom, which resulted in a glut of cheap natural gas, isn’t helping the windmaker’s cause. For instance, wind developer EDF Renewables, has not broken ground one of its long-planned big wind projects in California’s Tehachapi region because it has yet to find a buyer for the electricity generated.

And yet, despite the troubles in wind, the solar boom continues. Solar projects qualify for a 30% incentive tax credit through end-2016, when it declines to 10%. In the first quarter, solar accounted for 49% of announced new power plant projects and 39% of completed ones, according to SNL. (Those figures do not count rooftop photovoltaic arrays installed for homeowners and businesses.)

Whether solar suffers the same fate as wind in 2017 will depend on how quickly the industry becomes competitive with fossil fuels, particularly in states with high electricity costs like California.

In the meantime, one country—whose renewable energy industry is not subject to the whims of legislators—will continue ramping up. China has announced it intends to install 18,000 megawatts of wind energy and 10,000 megawatts of solar this year.

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