Over 7,000 MW of wind power are expected to be installed this year in the U.S. That’s down from 2008’s record 8,545 MW, but that still would make it the second best year in the history of the industry. Not bad, at a time when the rest of the economy tanked and the value of your primary financial policy driver became all but worthless.
What events drove those highly respectable numbers? What pushed them down and, likewise, what kept them up? What other industry events defined 2009 and promise to impact the industry in the future?
A chronological look at just some such events in the wind energy industry tells the story behind the numbers, and even sheds a ray of light on what’s to come for 2010 and beyond. (For another year-in-review list that’s lengthier with a bit less detail, check out AWEA’s year-end release.)
Fall 2008: credit crisis and recession hit hard. For all intents and purposes, this year actually started last year, if that make sense. By October of 2008, the month that AWEA held one of its popular Wind Energy Finance and Investment Workshops in New York City, the wind industry market dynamics that would plague the first chunk of 2009 were already all too evident. As members of the industry gathered in the finance capital of New York City for the event, the financial crisis had already grabbed the economy by its neck, and lenders had put the breaks on lending—even to an industry with the kind of upside that wind energy was acknowledged to have.
At the workshop presenters spoke of capital “sitting on the sideline” and offered forecasts for the coming weeks and months that ranged from a short-term slowdown with business picking up swiftly once the initial shock of the crisis wore off, to significantly weakened prospects thanks to a financial meltdown they said would leave no industry, no matter how robust, untouched.
In addition to the credit crunch, which hit the capital-intensive wind industry extremely hard, the production tax credit (PTC), wind power’s primary policy driver, became largely impotent virtually overnight. In the recession, companies weren’t making profits, and so tax credits became valueless.
February 2009: Congress gets stimulus package done. Seeking to avoid a meltdown, in February the federal government stepped in to shore up the nation’s economy. Congress passed, and President Obama signed, the American Recovery and Reinvestment Act of 2009, which included provisions deemed crucial to ensuring that the wind power industry hold onto its status as one of the economy’s few “bright spots,” to use AWEA’s favorite phrase.
Perhaps most importantly, ARRA provided a short-term mechanism for companies to monetize the PTC so that its intended value could be captured once again. The program gives renewable energy developers the option of forgoing the PTC and instead securing a grant from the Treasury department in the amount of a 30% investment tax credit.
Also part of the legislation was a new $6 billion U.S. Department of Energy (DOE) loan guarantee program as well as an additional year of bonus depreciation for 2009, a $1.6 billion increase in the clean renewable energy bonds (CREBs) program (a mechanism for tax-exempt utilities such as rural cooperatives that have no use for the PTC), $1.25 billion in undesignated funding for DOE’s Office of Energy Efficiency and Renewable Energy, and targeted provisions to encourage transmission for renewables. Finally, the bill included a three-year extension of the production tax credit (PTC), the longest in the history of this primary policy support mechanism for wind power.
May: WINDPOWER 2009 sets another record. In sharp contrast to the recession that made for a springtime of generally dreary headlines, a record 23,000 enthusiastic participants showed up in Chicago for the WINDPOWER 2009 Conference and Exhibition in May. By that point, rules and guidelines for the various ARRA programs were still being hammered out on the desks of bureaucrats in Washington, and not one dollar of Treasury grants had been issued. Still, attendees flocked to Chicago, eager to either grow their existing wind businesses or to learn how to join the supply chain of an industry that offered rare hope to the rest of the economy.
For hindsight’s sake, here’s one interesting program detail from WINDPOWER 2009: at the ever-popular turbine manufacturers’ forum, turbine producers said they didn’t expect ARRA funds to start flowing until the very end of the year or even 2010. Not so, as it turned out — more on that below.
A big theme coming out of the conference: “Yes to RES,” a reference to the need for Congress to pass a national renewable electricity standard in order to provide renewables something that it has never had: the kind of policy stability enjoyed by most other industries.
June: RES advances. In fact, the RES did make historic headway not long after WINDPOWER 2009 shut its doors. In a landmark 219-212 vote, The U.S. House of Representatives passed an energy bill in June that included an RES. The RES piece of the American Clean Energy and Security Act calls for 20% of the nation’s electricity to come from renewable energy by 2020, but it permits states to meet up to 8% of the standard through energy-efficiency improvements. The bill also includes carbon cap-and-trade provisions to begin reducing U.S. carbon emissions.
The previous week on the other side of the U.S. Capitol, the Senate Energy and Natural Resources Committee passed energy legislation that includes an RES of 15% by 2021, with states allowed to fulfill up to 4% of the requirement through energy efficiency measures.
Unfortunately, the legislation that came out of 2009, while historic for their inclusion of an RES, would not result in new wind energy development because of such factors as state renewables standards already on the books and the amount of wind power the industry has already deployed. Nevertheless, passage of the House bill was viewed as both a landmark moment for renewables legislation as well as an opportunity to strengthen the RES further along in the process.
July and September: Treasury grants start rolling. No entity has the reputation of moving slower than the federal government, but in this case, the feds got it done with relative swiftness. In July the U.S. Treasury Department began accepting applications for the grant program, and on September 1 the wind industry cheered when the first grants were issued.
October: new record wind farm completed. Besting a previous record that stood for three years, in early fall E.ON Climate and Renewables (EC&R) announced the completion of the world’s largest wind farm, a 781.5-MW facility located near Roscoe, Texas. The project’s 627 wind turbines from Mitsubishi, General Electric, and Siemens are deployed across parts of four Texas counties, covering nearly 100,000 acres. Those turbines generate enough electricity for more than 230,000 homes, according to the company.
The Roscoe facility edged out NextEra Energy’s 735-MW Horse Hollow wind farm, also in Texas, for bragging rights as the world’s largest wind farm. NextEra Energy (at the time called FPL Energy) completed Horse Hollow in the third quarter of 2006 and had held onto the record ever since. The length of time it took to top Horse Hollow is perhaps an indication of an industry maturing.
October: 3Q installation numbers turn heads. The U.S. wind industry may have surprised some observers by installing 1,649 MW of new power generating capacity between July and September, exceeding both the previous quarter as well as the third quarter of record-breaking 2008. The third-quarter numbers brought the year’s total to over 5,800 MW and the installed wind power capacity in the U.S. to over 31,000 MW. In its quarterly market report, AWEA said the deployment numbers are a clear sign that the U.S. Treasury grant program under the economic stimulus package is working.
To date, since the early July announcement to implement the stimulus bill, at least 37 different wind projects, using large and small turbines, have been recipients of the grant program, powering the equivalent of 800,000 homes and providing a lifeline for the industry and sustaining wind power as, once again, a bright spot in the economy.
January thru December 2009: manufacturing lags behind. While the industry was posting surprisingly solid numbers, wind power’s supply chain wasn’t following suit. As the wind power industry rounded the final turn of 2009 and began the fourth quarter, manufacturing continued to lag behind wind farm development and build-out, largely because turbine demand was still being satiated by existing supply and units already ordered. New manufacturing activity was down by about a third, AWEA said in its third-quarter report. There were 24 new, announced, or expanded manufacturing facilities through the third quarter of 2009, compared to 36 at this time last year.
That trend continues today, as the industry awaits stronger long-term policy signals — namely, a national RES.