Wind Problems Greater than Tax Credit, Job Losses?

The wind energy industry is heading toward a critical inflection point, facing the end of a significant tax incentive and only lukewarm interest from venture capitalists.

At the heart of water cooler debate about the future of the wind industry is the potentially lucrative tax incentive, the Production Tax Credit (PTC), set to expire at the end of 2012. There’s no extension from Congress in sight.

To qualify for the PTC, companies must to have a wind farm up-and-running by the end of 2012. The problem is that most don’t have the bandwidth to develop and complete a wind-energy project before then.

A study commissioned by the AWEA 100,000 jobs could be created by the wind industry if, in fact, the PTC is extended.

The American Wind Energy Association cautioned that thousands of jobs in the sector are now in jeopardy if the credit isn’t included in legislation slated for early in the New Year.

“The clock is ticking, business decisions are being made and some damage is certain,” said AWEA CEO Denise Bode in a statement. “However, when Congress addresses extenders next year, we are very confident that continuing the wind manufacturing success story will be a prominent objective.”Absent a strong signal from the White House that clean energy is a major priority, it will likely be difficult for companies to sign wind power agreements. The price of natural gas is also working against wind, and to potentially make matters worse, venture capitalists have been somewhat tepid about the wind energy industry.

VCs haven’t been as interested in wind because of the magnitude of capital required. Plus, the risks associated with developing large wind farms aren’t likely to decrease after the capital has been deployed.

A sliver of hope

Yet, despite the setbacks, there’s still some hope for wind. Some VCs have shown interest is in the supply chain side of onshore wind energy, such as technology components that don’t require the huge capital commitments that turbines do.

Daniel Hullah of Rockport Capital, which makes early-stage investments in technology, says he sees opportunities to improve the technology that goes into blades, wind towers and integrating wind energy into the grid.

“We have a number of investments,” Hullah said. “From censors that can forecast the wind to small-scale wind turbines.”

It’s also very important to grasp the hurdles to jump over when dealing with wind energy, Hullah added. Players must navigate and understand the position of the cycle, the price of natural gas, and the PTC.

“The three biggest headwinds – no pun intended – against the industry.”



Tags: Policy , Wind

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