United States

United States

Down to the tax credit finishing line in America

Google Translate

Project developers and turbine manufacturers in the United States are busy as never before. More than 830 MW of wind plants, most of them new installed capacity, are being installed in time to qualify for the federal Production Tax Credit (PTC). A wind plant must be completed by June 30, 1999 to be eligible for the tax break, which can mean savings of as much as $300,000 or more per wind turbine over the next decade. More than 30 projects, from Iowa and Wisconsin to California and Alaska, are in the pipeline or have been completed since late last year (table page 20). Almost 650 MW is new, while the rest is repowering of old projects. It will raise America's wind capacity of some 1800 MW at the start of the year by more than one-third.

As of mid-May all PTC construction and installation appeared to be on track to meet the deadline, although some projects whose status was uncertain late last year-most importantly, the repowerings in the Altamont Pass-are being postponed until after June 30. A few minor projects and some others that were only tentative appear to have been quietly dropped, too, since late last year (Windpower Monthly, December 1998).

In addition some minor, indeed inevitable, problems have occurred in this "PTC rush"-interruptions because of weather and because of bottlenecks in the supply of crucial wind turbine components. Recently, in the upper Midwest, construction on several projects was slightly delayed by wet weather that led to mud several feet deep. Another delay came because a company, in Shreveport Louisiana, which was making towers for both Vestas and NEG Micon-along with Enron Wind the largest suppliers of wind turbines for American projects-could not meet the work load and had to farm work out to keep on schedule. In Tehachapi, winds were so high for the first half of May that installation was halted at the Pacific Crest site on Cameron Ridge. The next weekday after the winds dropped, May 17, there were as many as eight cranes and 70 people on site trying to make up for lost time.

The downside, because recent activity has been so rushed and because of the uncertain future of the PTC, is an inevitable drop in activity in the second half of the year. Hardest hit is America's largest turbine manufacturer and project developer, Enron Wind Corp, which says it will cut 80 jobs at its manufacturing subsidiary-Zond Energy Systems in Tehachapi, California-by July 20. The layoffs will essentially end production of new Z-750 turbines at the facility, though a small staff will stay on to do maintenance on installed Zond turbines.

"The decision to reduce our workforce was a difficult one. It was considered after a thorough exploration of possible alternatives," says Ken Karas, Enron Wind's CEO and president. "Unfortunately, the expiration of the Production Tax Credit at the end of June 1999, which enables wind power to compete cost competitively with fossil fuels, has created a slow-down throughout the US wind power industry." The company says it remains bullish about its worldwide prospects and that its earnings will not be affected.

Severance packages

Those laid off will receive a severance package and help with trying to find new work. A little over a year ago Enron Wind, owned by the giant energy company Enron Corp of Houston in Texas, had hired some 50 extra employees because of the ramp up in production prompted by the PTC rush and because it has supplied more than 200 MW of turbines for two mandated wind projects in Minnesota. (Windpower Monthly, April 1999). Enron Wind, which also owns the German manufacturer Tacke Windenergie GmbH, is only one of two companies that manufacture large wind turbines in the United States.

The other manufacturer with a US factory, Denmark's NEG Micon, does not anticipate any lay-offs at its new plant in Rolling Meadows, Illinois. It has been supplying turbines to the US market both from within America and from Denmark. Blade manufacturer LM Glasfiber Inc, which has a recently established new Midwest plant, in Grand Rapids, North Dakota, also says it does not anticipate axing any jobs because of the post-PTC slow-down. Nor were there any reports of other lay-offs in manufacturing within the US.

June 30 has been described as the most important deadline in the history of the US wind industry, with much justification. The rush of development is the largest in almost a decade and a half, since 1985 when several hundred megawatts of wind was installed in California before another tax break ended, the federal energy investment tax credit.

Projects finished before the end of June qualify for a similar credit. The PTC is worth $0.017/kWh-$0.015/kWh adjusted for inflation-for the first decade of a project's operational life. It is estimated the credit could mean a savings for the industry of more than $300 million in taxes-or even half as high again-over the next ten years. The calculation is based on the estimate that a single 750 kW turbine, installed by June 30, could recoup $30,000 or more a year in tax breaks if it generates the expected one-and-a-half to two million kWh yearly.

Intensive lobbying is under way in Washington DC to reinstate the PTC-there are optimistic rumours that it could be in place as early as July rather than October-and that it would be retroactive back to June 30. But the current level of activity suggests that few project planners or financial backers are willing to bank on it, if only because rushing installation is costly and exhausting. It was only a year ago that wind lobbyists said they were almost certain the PTC would be extended by late 1998.

So keen is the industry to beat the PTC clock that developers of about 200 MW of new capacity have taken out insurance against losses in the event their project misses the deadline. "So much of the financial structure [of these projects] depends on the PTC," says Curt Maloy, a long time wind industry member now with Worldlink Insurance Services of Newport Beach. "It's really assisted developers to finance the projects because of the security of the finance stream." Worldlink, which insures around 2000 MW of wind farms in the US and Europe, has been offering the PTC insurance, syndicated through Lloyds of London, since the autumn.


The focus on the PTC is explained not only because of the potential tax savings it represents, but because the US wind market has been especially sluggish in recent years. Tepid government support, uncertainty over electricity deregulation and the fall-out from the bankruptcy of Kenetech Windpower, at the time the world's largest wind company, have all taken their toll. Kenetech's demise was particularly bad timing, causing investor and political confidence in wind to plummet after the California company went under, leaving a shambles of projects and plans to be sorted through by the courts. "We've laid Kenetech's ghost to rest," sighs Leif Andersen of Danish manufacturer and developer NEG Micon USA Inc.

Andersen notes that European wind firms, used to supplying smaller scale projects, have never before encountered the amount of installation now ongoing in North America. He includes the 57 MW so far installed of 100 MW on the Gaspe Peninsula in Quebec. "We got the hang of it, and I think we like it too," smiles Andersen. "It's been a gold rush."

The rush has been under way for some time. Major projects, such as the 107.25 MW Lake Benton I wind plant in Minnesota, made up of Zond turbines installed for Northern States Power, and the 41.4 MW of Mitsubishi turbines installed at Foote Creek Rim for PacifiCorp, the municipal utility in Eugene, Oregon, and Bonneville Power Administration, had already boosted the US into second place in world ranking of additions to installed capacity. The country added 577 MW in 1998-a far higher amount than the paltry 17 MW it had added the year before.


The American Wind Energy Association (AWEA) counts all projects installed over the past year in its tally of wind development. It predicts that $1 billion of wind capacity-or more than 1000 MW-will have been installed from June 30, 1998, to June 30, 1999. AWEA says 892 MW is new capacity and 181 MW is repowered projects. Including the big developments in the state last year, Minnesota is getting the lion's share, 247 MW, with Iowa not far behind at 240 MW. Texas follows with 146 MW in new capacity, and fourth is California, which gets 117 MW of new capacity, topped up with 181 MW of repowered projects, according to AWEA. Wyoming will have 73 MW of new wind capacity, Oregon 25 MW, Wisconsin 23 MW and Colorado 16 MW. "We are celebrating the revitalisation of the American wind market in 1999," says Randy Swisher, AWEA's executive director. Two of the trends behind the growth is consumer interest in special "green" electricity packages and the improving economics of wind, comments AWEA.

NEG Micon, which opened a manufacturing plant in Illinois recently, is equally optimistic that the market will continue after June 30, especially with the US industry's hard-won better credibility and even though projects on the books may not be as huge as those of the past year, not for a while. "We do see it as a sustainable market," says Andersen, who cites green pricing as a booster, although not one that is as important as a mandate for a minimum standard of renewables power in electricity portfolios. "We will be working in the US." A major supplier to the wind turbine industry, rotor blade manufacturer LM Glasfiber, agrees. It opened its US production facility a few months ago in Grand Rapids on the strength of its new found belief in the future of the US market.

Greg Jaunich of Northern Alternative Energy of Minneapolis, one of the smaller developers, says his firm will not be slowing down at all. It has another 30 MW to develop for Northern States Power between June 30 and spring of 2000. "We expected nothing, but there's plenty of projects out there," adds Søren Christiansen of Vestas-American Wind Technology. Vestas expects to be supplying turbines to five projects ranging from single turbine installations to those of more than five megawatts. In fact, Christiansen says that Vestas had hoped to postpone the projects, to catch up on documenting projects done for the PTC rush, but they were unable to do so.

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in