Power generation amid turbulent politics

The recent layoffs at wind-turbine plants in Northern Colorado may reflect the beginnings of an overall decline in the U.S. wind energy market. Although wind power advocates are hopeful that a tax-credit extension may give the industry a much-needed boost, long-term outlook for increased wind-power generation remains uncertain.

Wind power, like solar-generated energy, has been one of those promising new technologies that in theory simultaneously reduces the cost of electricity to consumers while saving the planet. But wind generation has faced obstacle after obstacle, sometimes even running head-on into environmentalists who oppose the giant mills that capture the wind to make the power.

Now, with a crucial vote in Congress looming on whether to extend the production tax credit that supports wind power generators, signs indicate that even with the extension, the industry will be in a retrenching mode.

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Eight of nine Colorado representatives in Congress support the extension. (The lone opponent is Congressman Doug Lamborn, R-Colorado Springs.) The 2.2-cent tax credit per kilowatt hour that is paid to wind-energy companies has brought the industry more than $1 billion per year, according to the Joint Committee on Taxation. First instituted in 1992, the PTC was renewed in 2009 as part of the economic stimulus law. But the tax credit has lapsed several times, and each time sharp drops in the industry followed.

Those drops have led energy industry watchers to wonder if the wind-energy business can survive without government help.

That argument has picked up steam in this election year. Republican presidential candidate Mitt Romney has called for the elimination of the credit, with his now infamous quote, “You can’t drive a car with a windmill on it.”

Colorado Sen. Michael Bennet is among those who thinks the industry can survive and thrive, with assistance from the tax credit.

“An extension (of the tax credit) will support this vital industry at a crucial point in its development and save thousands of jobs in Colorado and tens of thousands across the rest of the country. Congress must get its act together and extend the PTC immediately when it resumes session,´ said Bennet. “We are seeing firsthand how Congress’ failure to act on an extension of the wind PTC is killing jobs right here in Colorado.”

Layoffs by Vestas Wind Systems cost 120 employees their wind-powered paychecks at Vestas facilities in Brighton and Pueblo in August. And there may be more to come, even if the tax credit extension makes it through Congress.

“The U.S. wind market has experienced a general market slowdown. This slowdown has been caused, in part, by uncertainty over congressional decisions regarding whether or not to extend the Production Tax Credit at the end of this year,´ said Vestas spokesman Andrew Longeit.

Ditlev Engle, CEO of the Danish-based wind-turbine company, sees continued rough times ahead for the industry. “In the United States, the market this year is very, very busy,” he told a group of European Union officials in June. “But because of the potential laps in the regulatory framework in the U.S., this market will probably go down 80 percent next year.”

Some energy experts are skeptical that wind power can be counted on as a stable source of energy, with or without government support.

“The wind industry can and will sustain itself, but at significantly lower levels once the tax credits go away for good,´ said Lisa Frantzis, managing director, energy, for the consulting firm Navigant.

Even if the tax credit is renewed, the damage is done, she said. She expects that, as in the past, the renewal of the tax credit will be at the beginning of the new year and the credit will be retroactive.

“When they’re renewed this time, the industry will bounce back but not to the levels that they’re at this year,” Frantzis said.

Citing the recent drop in the price of natural gas, she said, “Right now the price is about the same per unit (for wind and gas), but without the tax credit the level is (significantly) higher.”

But the battle over the tax credit continues, with the backing of wind power advocates who still believe in the promise of wind as a replacement for “dirty” energy sources.

On a recent campaign swing through the Midwest, President Obama told audiences that 37,000 wind industry jobs would be threatened if the tax credit was not renewed. Obama said the PTC is designed to work with the Advanced Energy Manufacturing Credit, giving manufacturers that invest in equipment for clean energy projects a 30 percent investment credit.

Some Capitol Hill staffers believe the PTC will be renewed, but only after the November election. They also believe the discussion of phasing out the tax credit over a set period of years will gain momentum, giving the wind industry stability.

“Don’t throw the baby out with the bath water now, because you’ll almost kill the industry right now,´ said John Graham, the president of BP Wind Energy.

“We need a number of years’ help. (It is) very hard to predict (whether that) is two, four or six, but it’s kind of in that ballpark. It’s not forever, it’s not 10, and it just keeps us going to a place where we can compete on a more even playing field,” Graham told Environment and Energy Daily.

In all, the U.S. wind energy sector employs about 75,000 people – 5,000 of those in Colorado. About 9.2 percent of electricity generated in Colorado comes from wind power, according to the American Wind Energy Association. That number is expected to climb to meet Colorado’s renewable-energy portfolio standard requiring 30 percent of the state’s electricity to be generated from renewable sources by 2020.

Should Congress approve the PTC before the election, the AWEA projects the industry could add up to 54,000 jobs over the next four years.

That’s little consolation, however, for those caught in the recent round of layoffs, as uncertainty over wind power’s true potential continues to dog the fledgling industry.