EDP Renewables North America (EDPR), or Horizon Wind Energy, has laid off 10% of its wind workforce. Until the axe fell, it had more than 15 offices and some 330 employees in the US.
It is a sign of the times in a tight development market. On 19 October NextEra, the largest US owner-developer, announced it was temporarily halting permitting for its proposed 150MW Hyde County wind project in South Dakota because it did not have a power purchase agreement (PPA) although it has not cancelled the project.
The market stress is widespread, said Jesse Broehl, a US-based adviser at Make Consulting, speaking of the EDPR news. "I would not be surprised if other developers have not let go of 10% of their workforce," Broehl added. One long-time wind insider who preferred to remain anonymous said: "Development activities have slowed across the board. Certain developers are selling assets, some have had layoffs, (and sales of) data loggers and towers and prospecting activities have slowed to a crawl."
The US market faces lagging wind-power demand because of the slow economy and low natural-gas prices. It also faces uncertainty due to the lack of a national carbon policy and because of the looming end of eligibility - in December 2012 - for the vital production tax credit (PTC).
PPAs have become harder to secure and less favourable, while construction of merchant plants - those without secured PPAs - are hard to finance in the post-recession gloom. Early-stage wind development is more employee intensive than later-stage. So despite the boom in projects coming online in the next 14 months, in time to qualify for the PTC, there is less need for employees.
EDPR could be more exposed. The US's third-largest managing-owner of wind, it has more merchant plants than some, said Matt DaPrato, wind analyst at US-based IHS Emerging Energy Research.
Spot market prices can be more favourable in a robust economy. The Houston-based company, owned by Portugal's EDP Renovaveis, has been converting some of these "naked" wind farms by securing PPAs. "They probably had to take a hit on those," DaPrato added.
According to a Make Consulting report, EDPR's project exposure to spot prices in 2010 "went up from 10% to 16% (globally) because of lower demand for PPAs in the US.
From September 2010 to December 2010, EDPR (globally) rebalanced its portfolio from 2,003MW with secured PPAs to 2,459MW with secured PPAs. This brought 'spot exposure' down from 1,119MW to 764MW".
Make's May 2011 report also noted EDPR's revision of its 2011-12 growth forecast earlier in 2011. "It now plans on installing 2.4GW globally, down from 2.9GW, mostly through a downward revision in the US market," Make continued. "Favourable late-stage projects and adequate transmission (in the US) exist, but to move forward on construction would expose the Horizon fleet to too high a percentage of merchant projects, close to 30%, up from 19% in 2009."
IHS's DaPrato also pointed to changes that EDPR's ultimate parent is facing at home. In late September, Portugal's debt-ridden government gave the go-ahead to sell its stake in EDP, the country's largest company.
EDPR's US headquarters would not comment on the layoffs. But last month a spokesman told the Houston Chronicle that the "right-sizing" was due to weaker energy demand and the glut of natural gas in the US market, where development of shale gas is burgeoning. "It's a difficult time," Roberts told the newspaper. "But we feel optimistic... and we're in it for the long haul."
He said that in the US, EDPR was now emphasising operations and sales rather than new project development. EDPR owns more than 27 US wind farms totalling 3.5GW, a large proportion of the parent company's 8GW of wind globally.