Two large wind energy projects in the Texas Panhandle are racing against a looming Dec. 31 deadline when a critical federal tax credit expires, threatening to toss an already tumbling industry into freefall.
Project leaders are confident about the immediate future, but they and the companies that build the components used in wind farms are worried about next year.
“Say somehow an extension gets passed, you still have the lead time to manufacture the equipment,” Jason Tillman, project manager for Cielo Wind Services, said Friday as he waited for the arrival of a transformer that has to be ordered a year in advance. “Equipment isn’t being built, and that will make it hard for us to build anything next year because you can’t buy that stuff off the shelf.”
Wind farm operators argue they need the tax credit – which is based on how much energy a facility produces – to remain profitable while competing against natural gas with its currently depressed prices.
Republicans are split on the issue. U.S. Rep. Mac Thornberry, R-Clarendon, is among GOP lawmakers in key wind energy states who support the credit. He has included a 10-year extension in his bill proposing development of a wide range of domestic energy sources.
“I believe that there are instances in which a limited and reasonable federal tax credit can help get a fledgling industry off the ground,” he said in a written statement. “At the same time, I also believe these credits should not continue forever, and we should continually reevaluate their need and their cost.”
Cielo is overseeing the construction of the Spinning Spur Wind Ranch north of Vega in Oldham County, with a capacity to produce 161 megawatts, or about a fourth of the energy produced by a typical coal power plant.
“We’ve made pretty good progress,” said Walt Hornaday, CEO of Cielo, which developed the project and sold it to enXco, based in San Diego. “We’re planning on being done by the end of December. Then they take over.”
A megawatt is enough energy to power about 350 homes, but turbines don’t operate at their full capacity all the time.
The High Majestic II wind farm in Carson and Potter counties, with a capacity of 80 megawatts of power, could finish sooner.
“Construction is going well, and we would expect the project to be operational by the end of the summer,” said Steve Stengel, spokesman for NextEra Energy Resources, the parent company of Florida Power & Light.
As the U.S. wind industry has matured, more companies have established manufacturing plants to replace shipments of components from overseas.
France-based Alstom, a new player in the Texas Panhandle, operates a plant to manufacture nacelles, the part of a wind turbine where the electrical generation happens. Alstom’s facility is unable to get up to full speed with the industry waiting for action in Washington.
“Startup of Alstom’s Amarillo plant is ongoing, and activity there will continue to be driven by the needs of the market,” said company spokesman Adam R. Pratt.
Zarges Aluminum Systems earlier this year left behind a $4.75-million, 80,000-square-foot facility built by the Amarillo Economic Development Corp. in the city-owned CenterPoint Business Park. The German-based company planned to produce wind tower components, such as ladders and platforms, in the structure.
Company spokesman Tim Dannels cited the recession, uncertainty about tax credits, low natural gas prices and tight lending practices for putting the squeeze on Zarges customers and on the company itself.
Waves of similar wrong turns have swept the industry with the tax credit deadline nearing and lawmakers clashing over clean energy.
Mitsubishi Heavy Industries has put on hold plans for a $100-million nacelle plant in Arkansas, and Gamesa has announced it could lay off 165 employees in Pennsylvania this fall if orders for turbines don’t pick up. In Colorado, turbine-maker Vestas is considering laying off 1,600 employees this quarter, CEO Ditlev Engel told financial analysts earlier this year.
“If this hits manufacturing in a big way, nationally there could be 37,000 jobs lost next year,” said Eric Bearse, a spokesman for The Wind Coalition, an industry support group based in Texas.
The number of manufacturers tied to wind along with wind energy production have roughly doubled in recent years, according to federal data.
In the past 14 years, the tax credit has expired three times, and the installation of new wind capacity dropped as much as 93 percent the following year, according to the American Wind Energy Association.
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