The extension means that "about $3 billion in wind energy investments forecast over the next several years are now back on track across the country," says Randall Swisher of the American Wind Energy Association (AWEA). As much as 2700 MW of wind projects already in various stages of development can now proceed, though not all is slated for the next two years. The industry, adds Swisher, is now set to resume the "blistering pace" of last year when the looming expiration of the PTC helped push developers to install a record 1695 MW.
Vestas, the world's largest wind company, is now advertising for two job positions for a Portland turbine manufacturing plant and Portland's mayor, Vera Katz, recently confirmed that a renewable energy company with as many as 700 jobs could relocate to Portland if the PTC was renewed. According to the job advertisements, the "candidate must be willing to work temporarily in Palm Springs, CA and relocate with the company to the Portland Oregon area during the summer of 2002." Vestas' North American sales and installation group, with about 55 employees, is located in Palm Springs, California, but considerable wind development potential lies in the Northwest with 1500 MW currently on the drawing boards.
Despite the advertisements Vestas boss Johannes Poulsen still says that while the company is to build a new factory this year, no decision has yet been made about whether to locate it in the US. "We are at the moment considering whether there is a life after 2003 in the United States," says Poulsen, referring to the next date for expiration of the PTC.
The American wind market has a roller-coaster history of PTC uncertainty which has scared away investment in a manufacturing industry. The majority of wind turbines in America, including 450 Vestas turbines in the Northwest alone, are of foreign manufacture. Most recently Congress failed to extend the PTC, currently worth about $0.017 for every kilowatt hour sold by a wind producer in a project's first ten years, beyond its December 31, 2001 expiration. The new law extends the tax credit retroactively from that date to December 31, 2003.
At this stage, says AWEA's Christine Real de Azua, it is hard to predict how many MW will go ahead in 2002. The last time the PTC expired, in 1999, it was not reinstated until November 2000 and the industry increased installed capacity by only 52 MW. "Here we'd expect the dip to be much smaller of course, but there is going to be a dip," says Real de Azua.
Nordex USA's Robert Paul believes the fact the extension came early in the year will help the industry regain any momentum lost during the delay. "I think it will be easy to overcome. The people we've been talking with have been continuing work, expecting that something could happen with the PTC. Sooner was always better, so I think there are a lot of sighs of relief across the industry that this is happening."
SeaWest Windpower's Dave Roberts says how quickly the industry gets back on track will depend on how comfortable developers were about continuing to plan projects while the future of the credit was unclear. "It's hard to say. I can't really comment on how much PTC risk other developers were willing to take. All I can tell you is that we'll be completing Phase 2 of our Condon project in 2002, and we don't anticipate having any other projects coming on-line this calendar year. It will all be next year," he says. "There was a lot of speculation as to whether the PTC would be around and over the economic stimulus package. In the end we couldn't afford to take that risk."
The economic stimulus package, which also extended 16 other expiring tax provisions, had been caught in a partisan gridlock for months over issues that had nothing to do with the PTC. The scaled back version of the package was passed in the House March 7, and in the Senate March 8. Three previous House-passed versions were blocked by Senate Democrats opposed to the larger corporate tax cuts they contained.
AWEA had been lobbying for a five year extension of the PTC in an attempt to provide some long term stability for the industry. Two years, says Roberts, continues the kind of boom and bust cycle the industry has lived with for years and keeps the industry from going forth with projects that extend out beyond the PTC horizon. In areas with lengthy permitting requirements, like the Pacific Northwest, two years is an extremely tight timeline to fully develop a project, he adds.
"We are hopeful that either the energy policy package or the tax package being proposed in Washington will contain provisions for a more stable PTC structure," Roberts says.
He believes there's a "pretty favourable window of opportunity" for wind to make those gains. A five year PTC extension is contained in the wide ranging energy policy bill now being debated in the Senate. There is also a growing emphasis in the US on energy security and independence, which bodes well for renewables development. In the meantime, says Paul, two more years will put the industry back to work. "It takes out all of the uncertainty about what to do next," he says. "In my view, certainly this year and probably next, the PTC is going to be the most significant thing that will affect project economics."
Long term RPS
In addition to the five year PTC extension, the Senate energy debate is also tackling proposals for a federal Renewables Portfolio Standard (RPS), a policy measure that AWEA has sought as part of its long term strategy for wind. In mid-March, senators rejected a proposal that would require 20% of the nation's electricity be produced from renewable sources. The measure, sponsored by Vermont Senator Jim Jeffords, was defeated in a 70 to 29 vote. But a less ambitious RPS, setting a 10% target and currently part of the energy bill, was approved by the Senate just before the spring recess.
"We were grateful for getting 29 votes on it," says Jeffords' press secretary Diane Derby of the 20% defeat. "Obviously almost a third of the senate thought it was a good thing. We will now work to maintain something on the renewables portfolio standard in the underlying bill."
Opponents of the proposal argued the 20% standard could not be achieved without causing dramatic electricity price increases, and warned of a large transfer of wealth from states that do not have significant renewable energy resources to those that do. Supporters argued the measure would help diversify the US energy mix, reduce harmful emissions, create new high quality jobs and bring significant investment to rural communities.
Jeffords pointed to a study by the Department of Energy's Energy Information Administration (EIA) which he says found that the cost of a 20% RPS was only "modest." The EIA reported that an RPS target of 20% renewables supply achieved by 2030 would only cost consumers an extra 3%. "We have an obligation to act now to take the actions needed to secure clean, domestically produced, reliable sources of energy," he said. "We must not lag behind with weak standards, or no standards at all."