Wind developers depend on a 20-year-old federal production tax credit to turn a profit, so Washington's prevailing attitude on wind subsidies becomes all-important to their fate. This year, with Republican presidential nominee Mitt Romney's campaign on the record as opposed to extending the renewable energy subsidy, wind developers and their suppliers are worried.
ELWOOD, Ind. – A 15-mile stretch of rural Madison and Tipton counties has taken on the look of a hectic industrial worksite, thanks to congressional indecision in Washington.
Red construction cranes jut above browning cornfields. Trucks grind along newly hardened county roads in throaty low gear, throwing up clouds of white dust.
At key intersections, roadsides have been turned into holding areas for flatbed trucks draped with “Oversize Load” banners, or temporary gravel parking lots for pickups driven by unionized work crews.
The scene reflects a $400 million wind farm construction project in a mad race against the clock.
In the roughly 100 days left in this year, E.ON Climate & Renewables needs to erect one 370-ton wind turbine a day at its Wildcat wind farm here. The reason for the fast-track: The Dutch utility must make sure its wind farm qualifies for valuable federal renewable-energy tax credits that expire at year’s end and, depending on the outcome of the Nov. 6 general election, might not be renewed.
“That schedule’s really tight. It’s going to take a lot of work and a lot of cranes,” said Mike Behringer, construction manager for White Construction. The Indiana company has contracted with E.ON to erect a total of 125 turbines spread over 15 miles of farmland in Madison and Tipton counties.
As of early last week, only six turbines were built.
E.ON’s privately financed Wildcat wind farm is one of the costliest construction projects in the state. Each turbine rises about 300 feet and sits on a concrete pad that requires 50 cement truck loads to pour. Turbines are linked by underground transmission lines and roads cut through farm fields, and the farm has its own electrical substation.
E.ON and White didn’t figure on politics dictating their work schedule, but that’s wind energy for you.
Wind developers depend on a 20-year-old federal production tax credit to turn a profit, so Washington’s prevailing attitude on wind subsidies becomes all-important to their fate.
This year, with Republican presidential nominee Mitt Romney’s campaign on the record as opposed to extending the renewable energy subsidy, wind developers and their suppliers are worried.
As a result, with a record high number of wind farm installations underway across the nation this year, companies like E.ON are working their crews up to 12 hours a day, six days a week to beat the Dec. 31 deadline to have their turbines up and generating power in order to qualify for the lucrative tax credit.
“This is definitely going to be the biggest year ever for the wind industry,” said Peter Kelley, a spokesman for the American Wind Energy Association, which represents developers and suppliers. “But the whole industry could see a collapse of employment and installations next year” if the credit isn’t renewed.
Loss of the credit also could doom dozens of planned wind farms nationwide, including at least eight in Indiana, developers said. Most are planned on the wind-swept flat reaches of the state north of Indianapolis. Wind farm developers favor Indiana not only for its wind, but because it’s close to Chicago and other large cities where wind-derived power can be sold for a profit.
Developers say the subsidy is key to that strategy because it offers a 2.2 cents-per- kilowatt-hour credit that lets wind companies stay price-competitive with lower-cost conventional energy sources such as coal.
Congress’ practice of extending the credit only for one- or two-year intervals has made for an unhealthy “boom and bust” mentality in the wind industry, says its trade group.
“At least six to eight months before the tax credit expires, financial lenders hesitate in providing capital for wind projects because of the uncertainty,” according to the trade group. “Additionally, as the (credit) nears expiration, developers rush to complete projects before the deadline.”
The slowdowns and accelerations lead to inefficiencies in the construction of wind farms, which are typically mammoth projects that run into the hundreds of millions of dollars and need to be built as cost-consciously as possible, the trade group says.
Noel Davis contends with the uncertainty as a would-be supplier to the wind industry. He is seeking up to $50 million to build a factory in Marion to make the huge gears that go into wind turbines.
The threat of the tax credit not being renewed makes lenders reluctant to loan money to U.S. makers of wind turbines, said Davis, who formerly ran a gear manufacturer in Lafayette.
Lenders “are not willing to do this because there’s not a forecastable market for it,” he said. Davis said he has been forced to look to non-U.S. lenders for his money.
As a result of U.S. lender reluctance to invest in the industry, many major components of wind turbines come from abroad, Davis said.
On a recent tour of the Wildcat wind farm, Davis tagged along with E.ON and White officials and pointed out the foreign influence:
The massive 11-ton turbine blades are made in Brazil. The gearboxes that are the size of a box truck are assembled in Florida, but key components come from China.
As the year-end construction deadline draws closer at the Wildcat farm, E.ON will beef up its workforce of 170 mostly unionized workers to 225 in coming months, said Andy Melka, E.ON’s development manager.
He’s hopeful of seeing turbines generating power even before January as each circuit of a dozen or so turbines is built and switched on. “Every day of revenue is just huge with these things,” he said.
E.ON has hopes of expanding the Wildcat farm into Grant County, adding perhaps 400 to 500 more turbines at a total cost that would exceed $1 billion. All dependent, of course, on the tax credits.
“It’s a really uncertain future without ’em,” Melka said.
The Wind Energy Association has high hopes the credit will be renewed by Congress, in part because 80 percent of current wind farms are located in U.S. House districts represented by Republicans, who control the House. In addition, said Kelley, “I believe any president is going to want to save 37,000 jobs next year.”
The trade group paid for a study that estimated 37,000 jobs will be lost if the credit isn’t renewed.
In Indiana’s 6th Congressional District, which covers a large chunk of the Wildcat wind farm, Democratic candidate Brad Bookout favors extension of the credit, while Republican Luke Messer is undecided, their campaigns said.
Kelley said the credit has leveraged $15 billion in private investment in wind energy farms over 20 years, with more investment to come if the credit is kept alive.
“We believe we will get this key credit extended,” he said, with the vote possibly coming in Congress’ lame duck session after the election.
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