The federal Production Tax Credit (PTC) for wind power, which makes the renewable source of energy attractive by paying 2.2 cents per kilowatt-hour of generated power, is set to expire at the end of 2012 and sink the US wind industry along with it.
The projected decline in US wind development has been well covered: The American Wind Energy Association points out that in the year following each previous PTC expiration in 1999, 2001, and 2003, installed wind capacity in the US decreased by 93%, 73%, and 77%, respectively. Bloomberg New Energy Finance (BNEF) concurs, projecting a decline in turbine installations of as much as 95% in 2013 compared to this year.
Boom-bust time bomb
While Congress will have numerous opportunities to extend the PTC, potentially waiting for the lame duck session after the general election, coverage of the PTC has been largely pessimistic. The negative impacts of allowing the credit to expire are fairly obvious:
• American jobs will be lost. Vestas has already stated that it will cut 1,600 US jobs without an extension of the credit, and US manufacturers are sure to follow.
• Dirtier energy sources will continue to dominate. While the expansion of natural gas as a baseload power source will help reduce emissions relative to sources like coal, the reduction in wind installations will greatly reduce the progress made to-date on decarbonizing the nation’s energy supply.
• US renewables policy will continue to be fragmented. States will continue fighting their own battles in order to increase wind deployment to meet their individual Renewable Portfolio Standards (RPS), increasing the complexity of the patchwork of US energy policies that already hinders investment and project development.
In the longer term, analysts from BNEF, business leaders like GE Power & Water CEO Steve Bolze, and think tanks like the Pew Center all agree that US federal policy is creating a boom-and-bust cycle for renewables, driving investors to countries with more stable, long-term visions (read: China).
While the looming wind bust in 2013 will have clear negative consequences, can playing devil’s advocate uncover a few upsides to the industry’s tortuous cycle?
Keeping them honest
The frequent shakeup of the wind industry caused by PTC extensions and expirations forces the players to be more nimble, providing an impetus for companies to refresh their business models and value propositions in support of the economic viability of wind. Will this create stronger, more financially sustainable companies in the long run, by helping to weed out the Solyndras of the industry before an industry-induced bust creates a financial and political mess?
Playing the dark horse
While reports show US and China taking turns as the world’s “cleantech leader,” do these rankings, often based on absolute investment figures, really matter? Does the US need to be number one? Developing countries have proven apt at leapfrogging the US in the tech space. By giving up its leadership position at the expense of wind development, can the US save investment dollars, avoid technology lock-in, and leapfrog to more economically viable technologies and business models after they’ve been perfected abroad?
While the short-term negative consequences of the PTC expiration may, in the end, outweigh these hypothetical upsides, could we have a dispassionate dialogue before proclaiming wind’s doomsday in the US?
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