A Seller’s Market for Wind Power Has Its Drawbacks

The resounding message this week at the annual wind power show in Pittsburgh is the U.S. wind power industry is no longer a boutique industry, it has graduated to the next level. This year is expected to be a record year for installed projects, and prospects for next year are projected even stronger, say industry representatives. But it’s not all smooth sailing — a number of concerns, both old and new, pose real challenges to wind power meeting its full potential in the U.S.

Chief among these is that despite wind power’s increasing success, prices for wind turbines have been rising, not falling for the past two years, a situation fueled in part by high energy and commodity prices such as steel and copper. These increasing prices are also due to a perceived turbine shortage in the industry, partly the result of inconsistent national policy support in the U.S. and also because the turbines that are available are often destined for European markets where stronger incentives drive greater demand. It’s a seller’s market that involves many variables, has no easy answer, and may get worse before it gets better. If the increasing cost of wind turbines and components is a new challenge for U.S. wind power, then inconsistent policy support is the old challenge that still plagues wind power. Right now, and through 2007, the U.S. wind industry is enjoying support from the federal government’s Production Tax Credit (PTC), a valuable tax policy mechanism that can cut a project cost in half. Much to the industry’s bemoaning, the credit has not been approved by Congress for a long period of time. And when it lapses — as it has been allowed to do numerous times over the years — the industry grinds to a near-halt in the U.S., causing what one expert at the show called an accordion effect that the industry needs to learn to live with. Currently, the PTC is set to expire in 2007, a situation some believe will be avoided through effective industry lobbying of Congress. Others believe it’s simply an unfortunate and tumultuous part of the wind power business cycle that’s here to stay. The most recent challenge up on the radar for wind power is, incidentally, radar. At some sites, wind turbines can interfere with civilian or military radar and this has caused a potentially alarming situation keeping U.S. wind power from going forward. “Recent action by some U.S. government agencies to effectively halt development of many pending wind energy facilities could lead to a de facto moratorium on the development of wind power in the U.S.,” said a statement from the industry’s major representatives, the American Wind Energy Association (AWEA). This stems from The National Defense Authorization Act for Fiscal Year 2006, signed into law January 6, 2006 (PL 109-163), which contained a last-minute amendment inserted by Senator John Warner (R-VA) requiring the Department of Defense to study and report on the effects of wind projects on military readiness. A host of projects in the Mid-West have been thrown into doubt pending completion of this review. Reportedly as many as 15 potential projects in the development pipeline were issued notices of “perceived hazard” from the Federal Aviation Administration (FAA), bringing progress to a halt. Senator Warner has sponsored previous legislation at the federal level that would have proven negative for wind power. This article attempted to go beyond the surface jubilation of a wind industry enjoying a period of robust growth (and an active PTC) and conveys some of the underling issues that present challenges to U.S. wind power. The radar issue and the rising costs in the wind power industry will be explored in future articles following initial conference coverage and analysis.
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