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Wind power in Colorado: has it reached it’s peak?

Wind power has grown slowly but steadily in Colorado over the last decade. But now, with wind farms frequently coming online and manufacturing facilities buzzing with activity, the state faces the possibility of the wind energy industry screeching to an abrupt halt.

Colorado currently receives 9.2 percent of its generation capacity from wind power, generating the third highest percentage of power from wind of any state, according to the American Wind Energy Association (AWEA). Colorado has over 1,800 MW installed, which will be up to at least 2,000 MW by the end of this year, said Tanuj Deora, director of energy and environment at IHS Inc. And the potential for growth is strong – the state has over 16,602 MW of wind capacity in the queue, AWEA estimates.

In addition to being home to burgeoning developments and a strong wind resource, Colorado hosts The National Wind Technology Center. As a part of the National Renewable Energy Laboratory (NREL), the center is the U.S. Department of Energy’s primary national laboratory for renewable energy and energy efficiency research and development. The center is unquestionably a huge boon to the state’s wind industry.

Another asset to the industry in Colorado is the growing wind manufacturing sector. Currently, Colorado is home to at least 18 facilities manufacturing for the wind industry. This includes the national hub for Vestas, the world’s leading wind turbine manufacturer. In 2011, the company announced that it would invest $1 billion into four different facilities in the state, including a workforce of 2,500.

However, with the impending expiration of the Production Tax Credit (PTC) at the end of this year, many of those jobs are at risk. About 1,600 Colorado employees may face termination as early as this summer.

The CEO of the Danish company said May 2 that Vestas would decide before the end of the year about job cuts in the U.S. “In the third quarter, we have to decide whether we believe the [tax credit] is [to be] extended or not,” Ditlev Engel told analysts.

During AWEA’s WindPower event on June 7, Christian Venderby, chief operating officer of Vestas, remained positive about the U.S. wind market. “We’ve been actively hiring in the last 18 to 24 months. That will continue. Factories are running full hours.”

Andrew Longeteig, spokesperson for Vestas, said on July 9 that the company is optimistic the PTC will be extended. However, “uncertainty associated with the PTC requires us to have a flexible plan for the future that allows us to add, adjust or eliminate positions in 2012 to meet our business needs and market demands,” he said.

While layoffs at Vestas are still under speculation, if a PTC extension isn’t granted, the effects could be larger than the loss of jobs at one company, said Chris Worley, regulatory analyst for the State of Colorado Governor’s Energy Office. “If the PTC isn’t extended, the possibility of the industry expanding here is not likely.”

Worley said that Gov. John Hickenlooper has been a strong proponent of the extension and that eight out of nine of Colorado’s congressmen support the extension.

With or without a PTC extension, Deora said the Colorado wind industry should remain strong. Colorado boasts a competitive Renewable Portfolio Standard (RPS) that requires investor-owned utilities and cooperatives to provide 30 percent of their 2020 electricity through renewable and/or recycle energy.

Deora said that as gas generation becomes a larger part of the portfolio in the state and across the nation, wind should be considered by utilities as a complimentary form of generation. “Looking at the resources going forward, putting wind and gas together makes sense. Both are cheaper than coal.”

Some utilities in Colorado that have historically just generated coal and gas are already looking to diversify with wind power. Black Hills Corp., for example, is building a 29 MW wind project in southeastern Colorado. Tri-State Generation announced earlier this year that it has signed a 20-year power purchase agreement to buy electricity from the 67 MW Colorado Highlands Wind project in northeastern Colorado. Both projects are expected to be completed by the end of 2012.

For now, uncertainty about the future of the wind industry in Colorado still lingers. Worley said that no wind projects are scheduled for Colorado for 2013, but wind proponents remain optimistic that an extension to the tax credit will be granted soon enough to jump-start production schedules for next year.