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United States

Scary times

Never before has the wind industry been under so much pressure to deliver. In America alone, it is aiming to complete 700 MW of new capacity between now and July, if all goes well. That's half the amount that went up in the entire world in 1997 -- and will be about one-third of this year's total, once that is added up. Conventional technologies, struggling hard with their environmental image, are at least being given the chance to go green -- green with envy that is. For wind turbine manufacturers, however, it is no joking matter. They are faced with ramping up their manufacturing output to unheard of levels in no time at all, to meet an artificial deadline decided by political default.

That is the reality of the wind market in the United States today. The failure of government to get its act together on clean energy means that wind's vital Production Tax Credit (PTC) runs out on June 30. If a wind farm is not delivering power to the grid by then, it will lose up to $30,000 dollars per year per turbine. That's big money, meaning big trouble. If nothing else, the industry's eleventh-hour surge of activity raises the question again of the usefulness of such a roller-coaster approach to supporting renewables, based on a tax incentive that is so subject to the vagaries of Washington politics.

Nonetheless, the American Wind Energy Association is doing its best to rescue the tax credit, or extract a promise for its reintroduction when (if) it expires. Project planning took half a decade for the current PTC rush. Another hiatus would be crippling. The association is now gambling that Washington DC is less preoccupied than it was at this year's budget time, when energy policy was hardly on the radar screen for politicians facing re-election or intent on ousting the president. It's not, as they say in America, a sexy issue that grabs public attention. The Clinton Administration may be backing the Kyoto protocol, but Americans in general are nowadays using more energy than in years -- and more dirty energy. A majority do not want America to be part of the protocol; the fossil fuel lobby has frightened them into believing it will cost too much. None of this bodes well for the future.

For wind turbine manufacturers this is the really scary bit. Right now they are investing heavily in new machinery and people to cope with a dizzying development schedule. But from June 30 they face a yawning black hole where only days previously there was a market for hundreds of wind turbines. Recouping the investment must currently be a fashionable topic of conversation among wind company bosses, let alone their bank managers. Significantly it is only the big three -- Enron, Vestas and NEG Micon -- that are participating in the great tax credit rush of the nineties. In wind industry terms they are financially strong companies. That thought is comforting. It should mean that they are more than capable of avoiding the pitfalls of the California wind rush of the eighties, when there was such a surge of development that corners were cut so projects could qualify in time. The abandoned wind farm junkyards that resulted have been a thorn in the side of wind energy's image ever since -- and no amount of well operating projects have been able to totally repair the damage.

Fortunately, times have changed. This time, wind companies are shelving more marginal buffer projects in order to concentrate on the hottest ones. Vestas gave up on 75 MW in Texas when it realised its order books were full, allowing NEG Micon to clinch the contract instead. And late last month it was NEG Micon's turn to drop plans for up to 130 MW of repowering in the Altamont Pass in time for the PTC. The risk of delay because of legal problems was too great -- and the turbines were needed in Texas. Indeed, the behaviour pattern of the industry is a far cry from that of the eighties, when the financial carrot was capacity installed rather than energy produced. Today's inducement is not one to lead companies into corner-cutting temptation. But the ridiculous time constraints of the PTC could force them into decisions against their better judgement. Be it on the heads of the wise men of Washington.

Europe's brave stand

Meantime in Europe draft legislation has emerged for an obligation on each EU member country to meet 5% of its electricity demand from renewables by 2006. Good news indeed. Scary, too, considering the magnitude of the market that will come into being. But it is a sad irony for AWEA that the legislation proposed for Europe outlines the very market structure for which it has been campaigning for so long in the US, a campaign hindered by the immediate need to keep the PTC alive until a "Renewables Portfolio Standard" is in place.

The ink is barely dry on the European Commission's draft for a Directive to all member states. As yet it is not even in the public domain. There is a long way to go before its adoption into European law. But the chances of it being adopted should be good. The document goes out of its way to cater for the many different market structures in existence across Europe, allowing plenty of scope for individual countries to decide their own detailed legislation for achieving the Directive's overall aim. The main thrust is clear, however. Systems of support based on competitive market mechanisms must eventually replace subsidies. Scary times for the wind business on both sides of the Atlantic. But exciting ones, too, full of opportunity. All that is needed to realise the potential is some brave politicians.

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