The wind turbines that dot parts of rural Texas will be around for years.
But the days of new wind farms popping up seemingly overnight appear to be slowing down, if not coming to an end.
While Congress has approved an extension of the production tax credit on wind farms, which helped propel Texas to be the nation’s leader in wind energy, there are doubts about whether it will lead to another building boom.
Many wind farm developers are waiting for a clear definition from the Treasury Department on what starting construction by the end of 2013 actually means before committing to new projects.
In Texas, low natural gas prices are also making it more difficult to finance new wind farms.
“The PTC [production tax credit] is helping projects that are ready to go, that are shovel-ready, but the thing that is hurting the industry is really low gas prices that make it fairly hard to obtain financing,” said Jimmy Horn of Horn Wind Energy, which developed a wind farm in Archer County, south of Wichita Falls, and has two more in the planning stages in Archer and Clay counties.
One wind farm scheduled to go forward this year is Texas billionaire Boone Pickens’ BP Capital 377 megawatt wind farm in Lynn County, south of Lubbock, which will include 222 turbines, said Cole Robertson, a BP Capital Analyst.
It is BP Capital’s only new wind farm planned for the U.S; the other projects on the drawing board are slated to be built in Canada.
“Living year-to-year by the PTC extension is no good for the industry,” Robertson said. “We either need a long-term phase-out so people can plan for it or some certainty with the PTC so we aren’t going year-to-year.”
The tax credit works by giving wind farm owners 2.2 cents for every kilowatt-hour of power they produce for 10 years.
Extending the tax credit by one year is projected to cost the federal government about $12.1 billion, according to the Joint Committee on Taxation.
‘Important to America’
The uncertainty of the tax credit also took it toll on U.S. manufacturing of wind turbine components that some officials say won’t return anytime soon.
At least 37 Texas facilities manufacture components for the wind industry, according to the American Wind Energy Association. In the third quarter of 2012, AWEA said there were about 6,000-7,000 direct or indirect Texas jobs tied to the wind industry. But there were layoffs and shifting of jobs last year as orders dried up.
Last year, Trinity Structural Towers, which has a plant in Fort Worth that built 260-foot towers in the past, said it would shift resources away from wind turbine tower manufacturing. A spokeswoman with Trinity’s parent Company, Trinity Industries, declined to comment.
Another manufacturer with a presence in Texas believes the wind industry will rebound this year.
Richard Morrison, president and CEO of Molded Fiberglass Companies, said the number of employees at its Gainesville plant, which manufactures blades and also conducts prototype work, has dropped to 100 from a peak of 300.
“It will take some time for projects that have been on hold to ramp back up,” Morrison said. “There is a lead time of nine to 15 months. But we believe the extension of the PTC is important to the industry and important to America.”
Morrison said Molded Fiberglass, which has 11 factories across the U.S. and one in Mexico, also would like to see Congress approve a gradual reduction of incentives to end the industry’s boom-bust mentality.
“If you have a six-year phase-out, that’s enough time to reduce your costs and say this is a serious business and companies will invest in it,” Morrison said.
Tax credits enough?
Yet some question if the tax credit extension is enough to revive the U.S. wind manufacturing industry.
Sweetwater, which bills itself as the wind energy capital of the world, will continue to have the jobs associated with servicing and maintaining wind farms. But Sweetwater Mayor Greg Wortham, who runs the Texas Wind Energy Clearinghouse, which promotes and represents the wind industry, said he believes as many as two-thirds of the U.S. 37,000 wind manufacturing jobs were lost last year.
“I think most plants are down to skeleton crews,” Wortham said. “Will you bring them back for six-nine months of work? I don’t think so.”
Those concerns were shared by Walt Hornaday, president of Cielo Wind Power in Austin, who said more orders for turbines and components are coming from outside the U.S.
“We’re seeing a lot of supply shift overseas.” Hornaday said. “A one-year extension isn’t going to move them back. That’s probably the most disappointing part of the delay in getting the extension passed.”
Hornaday still views the extension as a pleasant surprise.
Cielo didn’t have any projects scheduled in the U.S. for 2013 but is reviewing its plans to see if any projects can be started by the end of the year.
“There’s a lot of excess capacity in turbine manufacturing,” Hornaday said. “The costs are coming down to get a project to work. We’re optimistic we can have a project or two started by the end of the year.”
While wind farms have been built closer to the Dallas-Fort Worth area in places like Young, Jack, Archer and Cooke counties, Hornaday said it makes more sense to build new wind farms in West Texas and the Panhandle now that Texas is scheduled to complete $6.9 billion in new transmission lines this year. Those transmission line costs will be passed along to ratepayers.
“The projects will go to the windiest areas,” Hornaday said. “It doesn’t make sense to build more projects where there’s 15 percent less wind.”
Despite the extension of the credit, the industry still has its share of critics.
Wind requires backup sources of power because of the variability of wind and its tendency not to blow on hot, summer afternoons when demands on the grid are at its highest.
The Texas Coalition for Affordable Power, a coalition of 160 Texas cities, notes that the state’s power grid counts on wind power to operate at only 9 percent of its capacity during peak summer months.
Last year, Donna Nelson, chairwoman of the Public Utility Commission of Texas, testified before a state Senate committee that “the market distortions caused by renewable energy incentives are one of the primary causes, I believe, of our current resource adequacy issues.”
But wind continues to get its share of positive publicity.
Google announced earlier this month that it had invested $200 million in the Spinning Spur Wind Project in Oldham County. On Christmas Day, the Electric Reliability Council of Texas, which operates the grid for most of Texas, announced a new wind-generation record of 8,638 megawatts, which represented 26 percent of the system load.
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