Wind power industry could falter if subsidy is lost
NEAR LAKE BENTON, Minn. -- On the crest of Buffalo Ridge in southwest Minnesota the blades of a 300-foot-tall wind turbine can be heard better than seen as they slice through a thick fog.
The machine in one of Minnesota's breeziest locations went on line last spring, and helped boost the state to a record wind energy year in 2011. Minnesota's wind power production capacity grew by more than 500 megawatts last year, half the output of the Prairie Island Nuclear Plant. Wind now provides about 15 percent of the state's electricity.
This year could be just as good, with some parts of the state seeing as much turbine construction as they in 2011. But if Congress declines to renew the production tax credit -- key federal subsidy for wind energy -- the industry could nose-dive in 2013.
That would likely bring a halt to the kind of expansion seen in Lincoln County, where 12 turbines comprise the Community Wind North project. The group's president, Conrad Schardin, said wind energy brings jobs, tax revenue and energy stability to the state.
"It's not going to be the savior to solve all our energy problems," Schardin said. "But it's just a piece of the puzzle is the way I look at it."
Despite the promise of wind energy, there's growing doubt in the industry that Congress will renew the tax credit. That has already affected construction, said Tom Wacker, senior vice president for the Minneapolis based Mortenson Company, one of the nation's largest wind energy construction firms.
In most years, the firm's construction calendar for the next year is largely full by the end of January, he said. But that hasn't happened this year.
"Right now there are no projects booked for 2013," Wacker said. "And I'm not sure any contractor in the U.S. has a project booked for 2013."
A bill to extend the credit so far hasn't gone anywhere in Congress. With lawmakers in a budget-cutting mood, renewable energy subsidies like the wind credit have been taking a beating. Several key ethanol and biodiesel subsidies expired at the end of last year.
In a regulatory filing with the Minnesota Public Utilities Commission the nation's largest wind power provider, officials for Twin Cities-based Xcel Energy, said it "appears unlikely" that Congress will extend the tax credit. Without the subsidy, the cost of wind energy will soar, Xcel regional vice president Laura McCarten said.
"Rather than forty dollars a megawatt hour it would be seventy dollars a megawatt hour, which puts it much more expensive than say, natural gas," McCarten said.
Xcel Energy intends to buy more wind energy this year, as much as 300 megawatts. But if the tax credit expires, company officials say they will reassess its wind power program for next year.
"We will not add more wind generation after 2012 unless it is cost effective," company officials said in a December filing.
McCarten said with electricity demand basically flat, the company doesn't need new wind energy.
"We just don't have the need for new power sources, period," she said.
Xcel does have to meet a state mandate that it obtain 18 percent of its energy from wind and other renewable sources by the end of this year. By 2016, the company must obtain 25 percent of its energy from such sources, and by 2020, 30 percent. But McCarten said the company is ahead of schedule in meeting those mandates. In fact, it's so far ahead that if the tax credit ends, Xcel could possibly go five years or more without underwriting construction of a single new wind turbine in the state.
Other utility companies, both in Minnesota and across the nation, are in similar positions.
Beth Soholt, executive director of Wind on the Wires, a St. Paul renewable energy promotion group, said some manufacturers in the wind industry have already announced layoffs, anticipating a big decline in business next year.
If the tax credit is not renewed, those sorts of job losses will increase as projects planned for 2013 are canceled, she said.
With that sort of drive-off-the-cliff outlook for wind construction next year without the credit, there's going to be an intense lobbying effort to keep the program -- and the jobs it supports - alive.
"We think that there are some good prospects in Congress," Soholt said.