Many in the industry don’t think a one-year extension will do much to secure the confidence of international companies and investors. That thinking extends to statehouses across the country — those places where jobs are the driving issue of the day. One such place is Arkansas, home to major manufacturing operations for everything from blades (LM Wind Power) to turbines (Nordex to Mitsubishi). The notion that a one-year extension, especially with looming tax reform, will give companies the confidence to stay or invest in his state is a nonstarter for Democratic Governor Mike Beebe.

‘We don’t need it renewed for a year,’ he told the industry at Windpower. ‘How in the world do multimillion dollar investments get made ... how in the world can business or industry chart a course ... how in the world can the transmission system be expanded as it needs to be ... how in the world can all these capital decisions be made when you’re making public policy for something as important as this tax credit on a year-to-year basis and you don’t know whether it’s going to be renewed? That’s insane.

‘I can’t imagine with the sort of [bipartisan] support that there would be any hesitancy at all not only to renew, but to put in a cycle that people can be assured that they can make decisions two years, three years and five years down the road,’ he added.

Companies React

For legislators like Beebe as well as Governor Sam Brownback of Kansas and Senator Charles Grassley of Iowa, both Republicans, there’s little secret why they are among those leading the crusade. Wind has become big business in their states, and the success and impact of the industry easily cuts along party lines. And that’s certainly why Udall is heading up the charge from the Senate floor.

Earlier this year, when Danish wind giant Vestas announced it was cutting more than 2300 jobs in Europe, it took the opportunity to warn that it could slash its presence in the US in half if the PTC failed to be extended. Many of those 1600 potential job losses could come in Colorado, where Vestas has spent about $1 billion building three manufacturing plants and one engineering facility. Those operations employ about 1700 people.

And it’s not just Vestas. Vermont-based NRG Systems, which manufactures wind measurement technology, had to cut jobs in May for the first time in its 30 years. President and CEO Jan Blittersdorf said, ‘Anything we can do to get past this and back to steady growth is fine by me.’

Mitsubishi Heavy Motors scrapped plans for a manufacturing plant in Beebe’s home state of Arkansas, which certainly didn’t diminish his passion for strong policy. And in rural Virginia, an area with few inroads in wind generation, a 45-MW wind farm targeted for completion by the end of this year was pushed back to 2015.

From developers to turbine manufacturers, the wind industry has already seen a stark downshift in its production plans. And while many are busy moving ahead to close out a strong 2012, they’re looking at the stark realities of 2013.

Where the Market is Going

As industry giants react to the lack of orders for 2013, they’re turning to other markets to fill the void. During a visit by Grassley to the Acciona plant in Iowa, company officials said they’re turning to Canada to fill their own pipeline. That’s a similar approach to that reportedly considered by Siemens and Gamesa, who see the smaller Canadian market as a way to weather the short-term downturn.

Canada in 2011 installed more than 1200 MW of new wind energy capacity and has plans to install 1500 MW in 2012. The country, which boasts stable policies in Ontario and Quebec, has surpassed 5000 MW of cumulative capacity, and it has plans to top 10,000 by 2015. Partnerships with companies rooted in the US market may soften the jobs impact there. But those companies are also sure to explore their options in Latin America, where wind has been gaining serious momentum.

Whether such a strategy would work for long depends on transportation costs — the main reason that domestic wind projects have drawn manufacturing to the US. For a company like TPI Composites in Newton, Iowa, the blades they make are not necessarily less expensive to produce than those coming in from places like China. But transporting 50-metre blades to construction sites can push transportation costs to $15 to $20 per mile, said TPI CEO Steve Lockard. The US wind industry has evolved out of a need for transportation efficiency in a way that’s unnecessary for relatively lightweight industries like solar. So from the US wind industry’s point of view, feeding long distance markets may keep the jobs intact, but it won’t create the long-term stable economics it’s working to achieve.

Absent consistent federal policy, domestic developers and manufacturers may look for other ways to regain their post-PTC footing. According to Kemper, as they view the prospects of a zero-build year, they’ll be forced to reconsider what constitutes an acceptable deal. And they’ll also be driven by existing state policies. Ultimately, we may see some states increase their wind incentives as a way to drive production and manufacturing within their own borders. While this likely won’t make up for the potential loss of the PTC, it could lessen the blow from its demise.

Dan Shreve of MAKE Consulting recently released a report that looks at the US wind industry from 2013 to 2016 under a series of scenarios, ranging from no extension to the adoption of a Clean Energy Standard. While MAKE expects the PTC to get a one-year extension, there are other factors at play that could weigh down the industry over the next few years regardless of an extension.

According to the report, none of the policy scenarios it looked at supported more than 7 GW of new installations per year, and the more likely scenario was peaks of about 5 GW through 2016, with significantly lower figures in the short term.

The reasons for the lower wind installations have much to do with the expectation of continued low natural gas prices and a lessening commitment from utilities in states with a Renewable Portfolio Standard (RPS). Those states, says the report, have made great strides in meeting the RPS and they’ll need to invest less in wind to maintain their pace.

‘Strong year-on-year build cycles, plus effective “banking” of renewable energy credits (RECs) ensure that many utilities are already in compliance and can use cheap REC purchases from existing capacity,’ the report says. MAKE’s baseline scenario estimates RPS policies will drive little more than 15 GW of new capacity through 2016.

While this changing policy landscape paints a murky portrait, it will force the industry to in many ways stand on its own ahead of schedule. This, says the report, will drive innovation and cost savings in ways that may not lead to massive installment numbers, but will position it better for future success.