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Why U.S. Wind Installations Are Slowing

“[AWEA says] utilities ‘see value of having 20-year contracts that provide electricity at lower costs than ever and that protect against volatility in fossil fuel prices.’ That’s a statement only a wind promoter could believe.”

This year, the wind industry added just 1.6 megawatts of new operating capacity in the United States, virtually unchanged (a 0.0027% increase) over 2012 installations.

The American Wind Energy Association (AWEA) wasted no time blaming the precipitous drop in development on a lack of long-term, predictable federal policies, which in ‘wind speak’ means uncertainty surrounding extension of the federal production tax credit (PTC).

It’s true that incremental extensions of the PTC have had an impact on slowing wind development but other, more significant factors contributed to this year’s drop-off, the primary one being the expiration of Section 1603 cash grants.

The massive infusion of public cash lavished on big wind under the American Recovery and Reinvestment Act of 2009 (ARRA) changed the economics of the industry overnight. Projects that otherwise made no economic sense became viable with the grant money.

In other cases, applications were pushed up in order to take advantage of the handouts. The industry’s project pipeline was emptied by the end of 2012, and it could take several years before additional proposals reach the shovel-ready stage.

During the period when the grant program was in effect (2009-2012) roughly 30,000 megawatts of new wind was installed, more than doubling the wind capacity in the country. The U.S. never experienced that rate of growth under the PTC alone.

With natural gas prices at record-lows and continued flat demand for electricity, it’s no surprise the stimulus-induced wind bubble collapsed and will likely push installations back to mid-2000′s levels. The production tax credit, if extended, will still offset above-market wholesale prices for wind power but the credit will not drive the same level of growth.

AWEA touts the rosy potential for new wind development as utilities announce Request for Proposals (RFPs) for more renewables. According to Liz Salerno , the group’s director of data analysis, utilities “see value of having 20-year contracts that provide electricity at lower costs than ever and that protect against volatility in fossil fuel prices.”

That’s a statement only a wind promoter could believe.

Wholesale prices for wind may be somewhat lower, but they’re still above market. In states where renewable portfolio standards have been adopted, utilities likely have no choice but to accept expensive contract prices in order to ensure compliance with the mandates.

The Public Utility Regulatory Policies Act (PURPA) proved decades ago that such long-term power contracts do not lead to lower costs. In fact, with contracts in place, it’s the wind developers that are shielded entirely from market price fluctuations. There is no cost benefit to ratepayers, nor will there be until the end of the contract, by which time the turbines will have reached the end of their useful life.

Even if wind developers are able to secure project financing, critical challenges face wind development which will make adding new capacity more difficult. These include the lack of transmission capacity, a lack of good wind sites, and increasing operation and maintenance costs.

But a key obstacle that developers prefer to ignore is public opposition which has grown steadily in the last few years, particularly in rural areas where onshore projects are likely to be sited. While people may accept the concept of wind power, siting is a different matter.

A Wind Energy symposium conducted in Western Massachusetts last year found that 96 percent of the participants supported local control over siting of industrial-scale wind projects, 63 percent supported an “outright ban” in their own towns – or anywhere in the region and the same number agreed that approval of such projects should require the unanimous consent of all landowners within a 3-mile radius.

The residents of Massachusetts are not alone. Distrust and negative sentiment toward wind developers and their projects run deep and have cropped up in every state where projects have been proposed.

5 comments

1 Jim Wiegand { 08.03.13 at 12:27 pm }

Good report Lisa however you are much too nice to the unsavory characters behind this industry. I happen believe that one of the primary reasons for the wind industry’s decline is that they have become victims of their own deception. The public is learning that what they have been hearing from this industry is not even close to the truth.

I can also tell you that the battle between this industry and the public is just heating up. People will not be forgetting the blatant corruption, trampling of rights, the industrial blight, and the industry’s hidden slaughter of protected species. This is why the kingpins behind this man-made disaster need to be publicized. The names of the primary financiers (not just the company names) that President Obama answers to and the incompetent FWS personnel actually making the calls, need to be prominently displayed in wind energy articles. They deserve it because of the environmental damage they are responsible for.

For example Google has invested into several terrible wind projects, The Shepherds Flat in Oregon and two other North Dakota wind farms. These deadly wind farms are located in golden eagle, ferruginous hawk, bald eagle and whooping crane habitat. These are highly protected species and badly needed habitat has now been transformed into a giant death trap for these species. The board of directors is a group of people with names. These names need to be out there for accountability.

2 JohnInMA { 08.03.13 at 1:20 pm }

New England is an interesting study in the paradox wind farm developers are facing. With the exception of NH and ME to a lesser degree, most states continue to elect state and national politicians who fully support AGW ideas and the associated political programs, green energy included. Yet, even in the Northeast Kingdom of VT, there is growing resistance to certain windfarms being built. Not all, but some of them. Most of the resistance has less to do with cost than with the usual other factors – impact on birds and humans and line of sight (beauty). Of course, cost is tossed in to make the argument against stronger.

However, this kind of pecularity may not be widespread. For example, parts of the midwest, including TX, and the west face resistance to certain projects, but it does not appear to be escalating as in New England. It may be related more to the size of adjacent populations to a degree.

But the bigger issue in my view is the way in which the integration of wind in the region (New England) has been so haphazard and not fully coordinated. It was brought to a head when during the summer peak less than a month ago, ISONE and others requested a fair amount of wind curtailment in order to assure quality and reliability. Some of the local officials who had advocated or pushed for their local installations were crying foul, and passing blame to utilities (even municipal ones) and grid operators.

Leave it to politicians to disavow the boundaries of their ‘political solutions’ once problems arise. Perhaps their responsibility began and ended at simply getting needed incentives and publically taking credit for their greeness. The rest of the issues are apparently ‘somebody else’s problems.’

My take – the politicians have polluted the water such that the bulk of the effort has been devoted to scaling wind installations and much less on evolving the efficiency – both through technology and prudent and wise farm design and siting. But, then, many believe spending money is the cure without regard to how wisely it is spent.

3 Lisa Linowes { 08.04.13 at 9:39 am }

Thanks for your comments. In follow-up to several points made: 1) transmission constraints, which are coming to light in New England now, have been an on-going and serious problem all over the US, including Texas where the public is being billed billions to construct new lines to transport west and north TX wind to points east.

2) W/r/t opposition outside of New England, law suits against wind are pending in NY, MI, CA, WA, NV and AL to name just a few. These fights are largely covered by the local press so may go unnoticed by many.

3) Finally, big wind is consistently rewarded just for putting energy on the grid no matter what time of day/year the energy is produced, no matter where the projects are located and without regard for whether the energy is needed. For this reason, the developers have no incentive to resolve their siting issues. Instead, the focus is entirely on scale and the engineering stops at “bigger is better.”

4 If You Support Wind Energy Can You Handle the Truth? { 08.07.13 at 9:08 am }

[...] and Section 1603 cash grants did expire and the industry went into a tailspin. Lisa Linowes has a nice explanation here. Some wind advocates say all energy sources get government support, and to varying extents, [...]

5 Weekly Climate and Energy News Roundup | Watts Up With That? { 08.11.13 at 3:55 pm }

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