Wind in their sails? Power industry waiting to see effect of renewed subsidy
GRAND FORKS -- The outgoing Congress on Jan. 1 approved a one-year extension of a subsidy for wind power, giving a lift to an industry bracing for a drop in activity.
But despite the credit, the industry is still waiting to see how much new generation will be installed with the encouragement of the credit and how much demand there will be to support makers of components such as wind towers and blades.
"I think some of the retrenchment has already happened because of the uncertainty cast on the market in 2012," said Douglas Tiffany, an extension professor and renewable energy researcher with the University of Minnesota's Department of Applied Economics. "There will be a very large delay before people get enthused again."
He cited one report predicting a nationwide drop in new wind generation nationally from 13 gigawatts to 1 gigawatt.
ND job losses
North Dakota has been hit by uncertainty over continuing demand for wind power with the loss of 345 jobs at LM Wind Power's blade factory in Grand Forks and 216 jobs at DMI Industries' West Fargo tower plant, which closed after DMI's corporate parent, Otter Tail Corp. sold the company in September.
Both companies cited uncertainty over the extension of the federal production tax credit, which provides a 2.2-cent credit for each kilowatt hour of renewable energy produced.
Bill Burga Jr., head of manufacturing in the Americas for LM, said the company is waiting to see how demand develops now that the credit has been extended.
"I'm watching any new market development very carefully to gain every advantage I can get," he said in an email Thursday.
A spokeswoman for Trinity Industries, the Dallas-based company that acquired DMI factories in West Fargo, Oklahoma and Ontario, is keeping quiet about its intentions for the facility.
"We don't have any plans we're publically announcing," said Nancy Farrar, a Trinity spokeswoman. "We're looking at a few things."
North Dakota and Minnesota have had more wind farms come online in recent years, but at a much slower pace than a few years ago when the generation was expanding nationwide.
North Dakota had a capacity of 1,469 megawatts at the end of the third quarter of 2012, according to the American Wind Energy Association. That is up 24 megawatts from the end of 2011, when 21 megawatts of new capacity went online.
Minnesota's wind power capacity remained flat at 2,717 megawatts as of the end of the third quarter 2012, according to AWEA.
Both states have had drops in new development compared to the most active years for the industry. North Dakota added 221 megawatts in 2010 and 489 megawatts in 2009. Minnesota had 526 megawatts added in 2011 and 396 megawatts added in 2010.
North Dakota Public Service Commissioner Brian Kalk said he hoped the extension for the tax credit for 2013 would prompt some developers to move forward with projects the commission has already approved. He pointed to one 150-megawatt, 75-tower wind farm planned for Adams County.
"Projects like that have kind of been waiting until the production tax credit worked itself out," he said.
Kalk said Minnesota's renewable energy mandate requiring utilities to have 25 percent of their electricity generated by renewable energy will continue to create demand for more wind energy.
Last year saw a spike in new wind farms that went online around the country before the tax credit was scheduled to expire Dec. 31, according to AWEA.
Tiffany said it is not clear yet if the one-year extension will be enough of an incentive to lead to new wind farms and new demand for components.
"It's hard for manufacturers of blades to plan for next year," he said. "I think they'll want to hear more before they're enthusiastic about hiring."