Wind Power, Growing Pains, and the Economy

I came across a few interesting factoids recently.

1. In 2007, wind energy not only led renewables in terms of installed capacity in the US, but actually led all forms of generation added that year – including coal.
2. 2008 was a record-setting year for wind generation, with 8,500 MW coming online – adding almost 50% to the domestic wind generation capacity.

If that’s all you knew about wind power in the US, you might think that the future for wind power looks pretty good. But here’s the catch: the federal Production Tax Credit (PTC) for wind and other renewables expired last year. In every previous instance that the PTC has lapsed, new wind installations plummeted the following year.

This year is no exception. According to a story in Forbes magazine this week Wind Sector Looks To Congress For Lift – Forbes.com:

Following a half-decade-long boom, the wind energy sector went bust in the second quarter of 2009. Some 1,200 megawatts of new wind projects were completed during the quarter, the American Wind Energy Association said Wednesday, half the average for the previous four quarters, when wind developers installed nearly 10 GW of generating capacity, making the U.S. the world’s largest wind market.

This is particularly critical for wind installations because the major cost associated with wind is the upfront cost of development. (Ironically, this is also its major advantage over supposedly “cheaper” coal-fired plants, which require additional outlays for fuel) The PTC has been used as an investment vehicle and sold to the larger investment houses and commercial banks. Unless you’ve been living under a rock for the last six months, you probably know that the financial sector has taken a beating and just recently shown signs of recovery. As a result, they have clamped down on lending in general, much less for multibillion-dollar projects whose viability depends on a patchwork of state incentives and regulation and a Federal tax credit that is only intermittently available. Although the American Recovery and Reinvestment Act renewed the PTC for three years, and added a more streamlined investment vehicle (Investment Tax Credits, or ITC), the hiatus slowed what had been record growth in the industry.

To be sure, there are other problems facing the renewable energy sector. From the Associated Press: Pickens calls off massive wind farm in Texas

HOUSTON (AP) — Plans for the world’s largest wind farm in the Texas Panhandle have been scrapped, energy baron T. Boone Pickens said Tuesday, and he’s looking for a home for 687 giant wind turbines.

The article indicates that the lack of a robust transmission system to feed the Pickens wind farm energy to where it could be used is part of the reason Mr. Pickens has altered his original plan. While the current (relatively) low price of natural gas makes the original Pickens Plan less economical, surely the expiration of the PTC, and inaction by Congress for a national renewable energy standard also factor into the decision.

Echoing Pickens’ concerns, the American Wind Energy Association has been pushing for additional funding for improved transmission lines. From the Associated Press coverage of the AWEA annual conference:

The U.S. has become the world’s biggest wind-power generator and of the electricity production added in the country last year, 42 percent came from wind turbines. But as more megawatts come on line, the problem of getting power from wind-swept plains to places where people actually live becomes more urgent.

“In some ways we’re reaching the glass ceiling,” said Rob Gramlich, vice president of policy at the American Wind Energy Association. It was the organization’s biggest annual conference to date, drawing 1,200 exhibitors and more than 20,000 people.

The country’s grid is aging, often overloaded and, in the case of wide-open states like Wyoming and North Dakota — some of the best places to erect wind turbines — not nearly extensive enough to move electricity to major markets where customers wait.

The wind industry group says it needs 19,000 miles of new high-voltage lines — at a cost of about $100 billion — for wind-farm developers to keep building.

There is really nothing standing in the way of the continued growth of renewable energy in this country – except a lack of political will. And that’s a real shame, because these kinds of projects are what our country and our economy could use right now. According to AWEA, the 8,500 MW added last year pumped approximately $17 billion into the economy, and created 35,000 new, good paying jobs at a time when the overall economy was shedding jobs at the worst rate since the Great Depression.

Sounds like the change we need, all right.