After finally hitting its stride, industry gets slammed by credit crunch
By Jennifer Alsever 31 October 2008
Just a couple months ago, wind energy had huge momentum.
T. Boone Pickens, who made his billions in the oil sector, touted the technology in a $58 million ad campaign and promised to build the world’s largest wind farm.
Fellow billionaires Phil Anschutz and Warren Buffett planned to build their own wind farms.
And wind power regularly appeared in stump speeches by presidential contenders Barack Obama and John McCain.
Then came the credit crunch. If the momentum for wind power was measured by the Beaufort scale, which measures wind speed, it has dropped from a strong gale to a gentle breeze.
After 45 percent growth in the market and $50.2 billion invested in the technology last year, the wind energy industry may come to a grinding halt as developers seek financing and big investors such as Lehman Bros. shut down.
“You can’t get funding,” said David Morris, a wind energy expert and vice president of the Institute for Local Self-Reliance in Minneapolis. “The credit crunch is hurting everyone, including the renewables.”
Congress recently renewed the wind production tax credit, which was set to expire this year. The tax credit, part of the $700 billion bailout bill passed earlier this month, supplies 2.1 cents per kilowatt hour for wind energy and will extend through 2009. But so far, it hasn’t appeared to have helped.
A number of big banks invested in wind projects to take advantage of those wind tax credits. But now many of those bank investors are disappearing, and others are far less profitable, which makes the tax credit far less inviting.
“There’s been a real pullback on banks investing because of the concern of profitability,” says Ethan Zindler, head of North American Research for New Energy Finance, a global industry research firm. “Tax equity funding is clearly the lifeblood of getting a project done.”
Still, alternative energy has been pitched as a top priority by both presidential campaigns on the theory that wind and solar energy can help the United States become energy independent and reduce greenhouse gas emissions.
The wind industry had set a goal for wind to provide 20 percent of the nation’s energy by 2030, up from just 1 percent today. So in light of the economic downturn, is that goal still feasible?
Yes, said Randy Swisher, executive director of the American Wind Energy Association. While 2009 and 2010 may see slower growth than the 45 percent rates of this year and last year, wind “will be an enormous growth industry,” he said.
“This is just a blip in the longer-term picture,” said Neeloo Bhatti-McAndrew, assistant director of the Energy Institute at the University of Delaware in Newark. “We’re being blindsided by the immediate consequences.”
If the nation hits the 20 percent wind mark, it could create 500,000 new jobs and $1.5 billion in tax revenue, according to a Department of Energy report issued this year. Greenhouse gases could be cut by 25 percent and water consumption cut by 17 percent, the report states.
Getting to that point, however, will require the construction of a 19,000-mile transmission network that could cost $60 billion and require extensive regional planning, according to a report by American Electric Power.
The high-voltage power lines would cross through neighbourhoods across the United States, inevitably drawing ire from homeowners and drawn-out eminent domain battles with state, county and local communities. “People won’t want to live under high-voltage transmission lines,” said Morris.
Building the transmission lines will also necessitate changes to public utility laws and changes in the permit process managed by the Bureau of Land Management — obstacles that have not been addressed by either presidential candidate.
Wyoming Gov. Dave Freudenthal has working closely with federal agencies to get permitting for transmission lines to bring wind energy from Wyoming to neighbouring states. Tax credits are needed to encourage wind production, Freudenthal said, but most vital will be the transmission lines to bring the energy where it’s needed, he said.
The capital costs of building a wind farm should drop due to the economic downturn, which has led to a 30 percent drop in steel prices in the past few months. The majority of a wind turbine’s weight is steel, said Swisher of the American Wind Energy Association.
While the credit markets forced some wind projects to cut back plans — Renewable Energy Systems Americas, for instance, will whittle in half its 2009 plans for a Colorado wind farm — business moguls Anschutz, Buffett and Pickens still plan to continue forward on their respective wind projects.
Railroad and telecom tycoon Anschutz is building a 2,000-megawatt wind farm in Wyoming and has rights to build a $3 billion, 900-mile transmission line to bring wind from Wyoming to California, Las Vegas and Phoenix.
Buffett’s MidAmerican Energy is moving ahead with construction of four Iowa wind farms, totalling 483.8 megawatts.
Picken’s company, Mesa Power, planned to invest $10 billion to build the world’s largest wind farm — equalling 4,000 megawatts — in the Texas panhandle, but the economy may cause the company to “scale back a bit,” said Pickens spokesman Jay Rosser.
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Wind Power Battling Economic Headwinds
After finally hitting its stride, industry gets slammed by credit crunch
By Jennifer Alsever
31 October 2008
Just a couple months ago, wind energy had huge momentum.
T. Boone Pickens, who made his billions in the oil sector, touted the technology in a $58 million ad campaign and promised to build the world’s largest wind farm.
Fellow billionaires Phil Anschutz and Warren Buffett planned to build their own wind farms.
And wind power regularly appeared in stump speeches by presidential contenders Barack Obama and John McCain.
Then came the credit crunch. If the momentum for wind power was measured by the Beaufort scale, which measures wind speed, it has dropped from a strong gale to a gentle breeze.
After 45 percent growth in the market and $50.2 billion invested in the technology last year, the wind energy industry may come to a grinding halt as developers seek financing and big investors such as Lehman Bros. shut down.
“You can’t get funding,” said David Morris, a wind energy expert and vice president of the Institute for Local Self-Reliance in Minneapolis. “The credit crunch is hurting everyone, including the renewables.”
Congress recently renewed the wind production tax credit, which was set to expire this year. The tax credit, part of the $700 billion bailout bill passed earlier this month, supplies 2.1 cents per kilowatt hour for wind energy and will extend through 2009. But so far, it hasn’t appeared to have helped.
A number of big banks invested in wind projects to take advantage of those wind tax credits. But now many of those bank investors are disappearing, and others are far less profitable, which makes the tax credit far less inviting.
“There’s been a real pullback on banks investing because of the concern of profitability,” says Ethan Zindler, head of North American Research for New Energy Finance, a global industry research firm. “Tax equity funding is clearly the lifeblood of getting a project done.”
Still, alternative energy has been pitched as a top priority by both presidential campaigns on the theory that wind and solar energy can help the United States become energy independent and reduce greenhouse gas emissions.
The wind industry had set a goal for wind to provide 20 percent of the nation’s energy by 2030, up from just 1 percent today. So in light of the economic downturn, is that goal still feasible?
Yes, said Randy Swisher, executive director of the American Wind Energy Association. While 2009 and 2010 may see slower growth than the 45 percent rates of this year and last year, wind “will be an enormous growth industry,” he said.
“This is just a blip in the longer-term picture,” said Neeloo Bhatti-McAndrew, assistant director of the Energy Institute at the University of Delaware in Newark. “We’re being blindsided by the immediate consequences.”
If the nation hits the 20 percent wind mark, it could create 500,000 new jobs and $1.5 billion in tax revenue, according to a Department of Energy report issued this year. Greenhouse gases could be cut by 25 percent and water consumption cut by 17 percent, the report states.
Getting to that point, however, will require the construction of a 19,000-mile transmission network that could cost $60 billion and require extensive regional planning, according to a report by American Electric Power.
The high-voltage power lines would cross through neighbourhoods across the United States, inevitably drawing ire from homeowners and drawn-out eminent domain battles with state, county and local communities. “People won’t want to live under high-voltage transmission lines,” said Morris.
Building the transmission lines will also necessitate changes to public utility laws and changes in the permit process managed by the Bureau of Land Management — obstacles that have not been addressed by either presidential candidate.
Wyoming Gov. Dave Freudenthal has working closely with federal agencies to get permitting for transmission lines to bring wind energy from Wyoming to neighbouring states. Tax credits are needed to encourage wind production, Freudenthal said, but most vital will be the transmission lines to bring the energy where it’s needed, he said.
The capital costs of building a wind farm should drop due to the economic downturn, which has led to a 30 percent drop in steel prices in the past few months. The majority of a wind turbine’s weight is steel, said Swisher of the American Wind Energy Association.
While the credit markets forced some wind projects to cut back plans — Renewable Energy Systems Americas, for instance, will whittle in half its 2009 plans for a Colorado wind farm — business moguls Anschutz, Buffett and Pickens still plan to continue forward on their respective wind projects.
Railroad and telecom tycoon Anschutz is building a 2,000-megawatt wind farm in Wyoming and has rights to build a $3 billion, 900-mile transmission line to bring wind from Wyoming to California, Las Vegas and Phoenix.
Buffett’s MidAmerican Energy is moving ahead with construction of four Iowa wind farms, totalling 483.8 megawatts.
Picken’s company, Mesa Power, planned to invest $10 billion to build the world’s largest wind farm — equalling 4,000 megawatts — in the Texas panhandle, but the economy may cause the company to “scale back a bit,” said Pickens spokesman Jay Rosser.
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