Behind Iberdrola’s Portland layoffs: expiring wind-energy tax credits, declining demand, overloaded grid, cheap natural gas
Portland Mayor Sam Adams blames the U.S. government for 25 layoffs announced Tuesday at Iberdrola Renewables Inc.’s Portland office.
To Adams, the federal failure to extend a wind energy production tax credit beyond the end of this year has created uncertainty that’s killing orders for renewable-energy producers such as Iberdrola and Vestas Wind Systems, which is also bracing for Portland job cuts.
“Without the certainty of that extension, project developers are not doing projects in the U.S., and manufacturers are not getting orders,” Adams said.
Renewable-energy developers confirm that orders have declined because of uncertainty over the tax credit, which gives wind operators 2.2 cents per kilowatt hour. But other factors are also ending the wind boom:
The recession has depressed demand for electricity, including renewable energy.
Utilities have made headway toward satisfying state renewable mandates, the biggest driver of wind development. Portland General Electric, for example, has built and bought enough wind energy to satisfy Oregon’s early requirements; the state has called for utilities to meet 25 percent of their demand with renewables by 2025, with lower targets in intervening years.
Projects are hitting transmission constraints. To date, wind development has largely occurred in windy areas with readily available transmission capacity. The grid wasn’t built with intermittent wind farms in mind, however. The concentration of wind development in Washington, California and Texas has created bottlenecks that require expensive solutions.
Gas is cheap. Expensive wind energy has trouble competing with natural gas prices near record lows because of production from hydraulic fracturing and drilling in deep shale formations.
California has changed its rules to reduce renewable energy imports and promote in-state development. That’s a problem for developers in the Northwest, where more than half the wind power generated is bought under contract by California utilities.
Europe’s debt crisis saddles European companies such as Iberdrola and Danish-owned Vestas with financial and political problems.
Jan Johnson, an Iberdrola spokeswoman in Portland, confirmed the layoffs. The company, a subsidiary of a Spanish energy giant, has its North American headquarters here and also develops and operates solar projects.
“Energy has historically been a cyclical business, and we’re in a down cycle now,” Johnson said. “As a result, we had to make the difficult decision to lay off about 50 employees out of our nationwide staff of more than 900. About half of those laid off work out of our Portland office.” The cuts will bring Iberdrola’s Portland work force to about 350.
“Iberdrola Renewables is focusing on operations in 2012 rather than new building due to low energy prices, a poor economy and regulatory uncertainty,” Johnson said, adding that the company has a “solid balance sheet, positive cash flow and no real debt.”
Mayor Adams traveled to Spain a year ago to try persuading Iberdrola to stay in Portland. He said Tuesday that the city is doing everything possible to retain the company. Asked whether incentives have been offered, Adams said he was “not willing to talk about that.”
Scott Andrews, board chairman for the Portland Development Commission, said the agency remains in discussions with Iberdrola. He’s confident the company’s headquarters will stay in Portland. With layoffs out of the way, company officials are expected to solidify plans in a matter of weeks, he said.
Andrews expects the company to keep its Brewery Blocks location, where it’s been since 2003. As recently as last year, Iberdrola officials considered expanding at the U.S. Bancorp Tower or in buildings not yet built. Iberdrola’s local leases, for about 85,000 square feet in two buildings, expire in 2013.
Some form of public subsidy for Iderdrola has been widely expected, especially after the PDC in 2010 issued a no-interest loan to help fund construction of a new headquarters for turbine-maker Vestas. That will cost taxpayers $2.6 million.
“It’s not going to be of the same magnitude as a new building or a new location with a promise of ‘x’ number of jobs over a period of time,” Andrews said of an investment for Iberdrola.
But some financial contribution is likely to keep Iberdrola in Portland, he said, adding: “I think that’s worth something.”
Staff Writer Brad Schmidt contributed to this report.
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