Extended U.S. Tax Credit Blows Fresh Air Into Wind Projects
Wind-farm construction in the U.S. nearly ground to a halt after ending in a frenzy late last year. But the pace of turbine installation is set to pick up substantially later this year, largely thanks to the recently enacted extension of the federal production tax credit, say utility and wind-sector experts.
Frank Maisano, an energy specialist at Bracewell & Giuliani, a law firm in Washington, D.C., with renewable-energy clients, says that, with so much uncertainty about extending the credit beyond 2012, many developers rushed to finish projects by year-end. The American Wind Energy Association says wind-turbine contractors brought on line a record 13,124 MW of wind capacity in 2012, including 8,380 MW in the last three months.
Tim Maag, vice president and general manager at Mortenson Construction, saw a big drop-off in wind-farm work for the first half of 2013. "Due to the fact that the extension took so long to get passed, most of our customers had put their construction plans on hold, which was expected," he says, adding that work in the third and fourth quarters will be "very robust." Says Maag, "We have responded to numerous RFPs and pricing requests since the beginning of the year."
The tax-credit extension approved by Congress and signed by President Obama in January as part of the "fiscal cliff" compromise provides a $22/MWH tax credit for the first 10 years of a wind farm's operation. For the first time, the latest extension applies to all projects under construction by Dec. 31, 2013, even if they are not completed until next year. Under the previous tax credit, a wind farm had to be completed and operational by the end of 2012 to qualify.
Several utilities already are moving to take advantage of the lower wind-power prices the tax-credit extension provides. Texas-based Austin Energy plans to issue a request for proposals for 200 MW of wind power within the next few weeks, says a spokesman. The Tri-State Generation & Transmission Association, which secures power for 44 electric cooperatives in Colorado and three nearby states, issued an RFP for 100 MW of wind power on Feb. 13, says a spokesman. The tax-credit extension "certainly makes wind power more financially attractive," he says, noting that developers typically pass through benefits of the credits to power buyers in the form of lower power prices.
Last year, with lower wind-turbine prices and strong competition among developers, wind-power prices offered by developers in regions with the best wind resources, such as the Great Plains, were often below $40/MWH; without the tax-credit, most offers likely would have been above $60/MWH—a big difference to utilities already concerned about the generally higher cost of renewable energy.
Last month, Xcel Energy-Colorado asked the state to grant a waiver allowing it to accelerate the procedural schedule to evaluate potential wind projects. In a statement, Xcel said it hopes to issue an RFP soon. Xcel Energy's Northern States Power Co.-Minnesota also says it will issue an RFP for 200 MW of wind power.
A spokeswoman for Duke Energy Renewables, which built 800 MW of new wind capacity in 2012, says the tax-credit extension "removed uncertainty" and enabled utilities to plan RFPs and long-term power purchase deals. Maisano predicts a stronger rebound in wind-farm construction in the Great Plains and Midwest, with fewer regulatory hurdles and less opposition from environmental groups.