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United States

Fear of commitment

Now that America's production tax credit is in place -- again -- wind developers are falling over each other to get their projects in the air, leaving little doubt that the PTC is the prime ingredient that makes the US wind market soar. The evidence is clear. In May alone, project developers announced a total of nearly 900 MW in projects, after almost no announcements in the months since December 31, when the PTC expired and had yet to be renewed.

In the Northwest, the Bonneville Power Administration says 2600 MW are in the queue for interconnection services and the top six proposals of more than 600 MW will likely be completed by the end of 2003. FPL Energy, the leading US wind developer, says its plans include at least 1000 MW and up to 2000 MW before the end of 2003, when the credit expires again. And now Greg Jaunich, who says he wants his company, Navitas, to have the market power of a PacifiCorp Power Marketing or FPL, is joining forces with Spanish wind giant Gamesa to develop 1000 MW.

The US wind market has the potential to be the world's largest in the next few years and it doesn't stop with just sticking turbines in the ground. In strategies clearly aimed at getting their share of this growing market, three of the world's most prominent wind turbine makers -- all European -- have announced they also will build manufacturing facilities on North American soil. Once Congress finally passed the PTC extension, Vestas said it would build a plant in Portland, Oregon, and churn out about 1000 turbines a year for the US market. Late last year, Nordex said it is considering a new facility in Montana, conditioned on the growth of Montana and Northwest wind markets. And in a late-May announcement, Gamesa said its move into the US market also includes a new manufacturing plant, which will likely find a home someplace in the Midwest.

There's a pattern here. Like 2001, which was the last time producers faced a PTC deadline, next year is shaping up to be a banner one for wind. But then everything stops and the PTC roller coaster ride begins all over again. What is lacking in the US that other countries seem to intuit? Randall Swisher of the American Wind Energy Association has it nailed. He says the missing ingredient is a commitment to a rational policy. "When you look at what we've seen in terms of European growth in the last decade, and contrast it with growth in the US, you see the difference in the role that stable, strong policy can play in driving a consistent market," he said at April's Global Wind conference in Paris.

Both sides of the US Congress have now completed their versions of a comprehensive energy bill, but the differences between the House and the Senate versions could end up killing both, and leave the US where? The unfortunate answer is, exactly where it was at the beginning of the year.

The Democrat controlled Senate's bill, passed in April, provides the strong policy commitment the wind industry needs. Among other things, the bill contains a five-year PTC, a renewables portfolio standard (RPS) for 10% of green energy in the power mix, and a number of measures to fix the nation's transmission system. Yet the legislation is so different from what the Republican influenced House energy bill proposes that a train wreck in conference committee, where differences between the two chambers are traditionally hammered out, is likely. That could slow, if not stop, the adoption of any comprehensive energy policy this year.

The House bill supports the Bush administration's penchant for traditional fossil fuel solutions to the nation's security and energy crises and proposes to open up the Alaska National Wildlife Refuge for oil exploration, something the Senate strongly opposes. It also includes a five-year PTC, a provision everyone can agree on, but it doesn't include a more contentious national RPS.

Politics of limited vision

While the Senate bill is clearly more beneficial for wind development, either would at least set some type of long term policy for the industry. Without it, wind producers must limit their vision to the next PTC horizon. This is unfortunate because renewable energy, especially wind power, has become the darling of the US energy and environmental establishments. Each may disagree about what the right mix is or whether goals should be achieved through incentive or standard. They do, however, agree that, with its lower costs, wind is much more appealing than it was even two years ago and offers diversity and environmental advantages utilities can't get from fossil fuelled plants.

Swisher thinks that US wind power can supply 6% of the nation's electricity by 2020. That's a long time to sustain development without a federal commitment to do so.

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