Wind Energy as Election Collateral Damage

Wind Worries It is Collateral Damage

The wind industry is starting to panic.  The American Wind Energy Association (AWEA) reported that just 395 megawatts of wind generation was installed in the third quarter of 2010.  Through the end of September 2010 year capacity additions were 1,634 megawatts, down 72 percent year-over-year and the lowest point since 2006. In 2010, US wind projects are 50% of the rate in Europe and 33% the pace of China according to AWEA.  Clearly, the turnaround in capacity additions the industry expected for the second half of 2010 is not happening.

The result is the long knives are out with the wind industry roaming the halls of Congress demanding action.  Their proposed cure is a national renewable portfolio standard that would require states sitting on their hands to get serious about adding renewable energy especially wind to their utility portfolios.  It is not as if Congress and the Administration are hostile to wind.  The Obama stimulus program included $4.5 billion for wind energy projects and allowed wind developers to use either the investment tax credit (ITC) or the production tax credit (PTC).  The ITC can also be converted into loan guarantees but the projects must be in construction by the end of 2010.

And that is adding to the panic in the wind industry.  The slowdown in capacity additions in 2010 now risks the stimulus money and loan guarantees which likely will not be extended so its use it or lose it time for the wind industry.

But Congress has its own problems and survival for themselves trumps wind worries.

The more the wind industry pushes Congress to act the more pushback they are getting from opponents and worried incumbents that too much of the stimulus spending is going offshore to buy wind turbines and solar panels from China and elsewhere.  Remember in Europe this same unintended consequence cratered the feed in tariff regimes in Spain and cut them deeply in Germany in a FiT of pique as first local manufacturers complained China was undercutting them in prices and politicians responded by cutting the FiT subsidies conveniently under the cover of deficit reduction.

AWEA says that is not happening in the US claiming most wind turbines are being made in the US, but the Republican campaign committee told the Wall Street Journal that it had identified 11 wind projects using stimulus funding to procure 695 of 982 wind turbines from foreign sources presumably China.

AWEA president Denise Bode wrote letters to Congress October 22nd asking for a “cease fire” on the sniping for fear that it will damage Congressional relationships and imperil extension of the renewable energy tax credits.

So what?

The wind industry has been a darling of Congress for years and used its legislative prowess to win substantial tax and stimulus benefits.  But in so doing it has become dependent upon subsidies and subject to market volatility that can’t be controlled by Congressional largesse.

Meanwhile the consolidation of the renewable energy markets continues as weak conditions make vulnerable players ripe for acquisition.  But not even the major league players are immune from the market volatility and the Chinese ability to manipulate the market to satisfy their own demand first and export the rest of their production capability at prices other suppliers of wind turbines and solar panels find impossible to meet.  So all those green jobs promised by the stimulus spending appear to Congress to be as fleeting or phantom as the political benefits they expected from their deluge of spending.

And nothing makes a “scared voter” madder than the prospect that his tax money and the high deficit is the result of reckless Federal spending on projects and equipment bought from China.  The long knives are out, alright, but they are being used by voters in today’s election in an attempt to slay the reckless spending monsters under the bed—and a few wind projects are likely to be collateral damage.

Time for wind to worry about learning to compete without subsidies.