Wind Market Taking Hit in 2009

Aug. 11, 2009
Following a record year in 2008, the wind industry has seen its growth drop dramatically. Will it speed back up -- and when?

T. Boone Pickens has long had the knack for personifying any number of characters, from the heavy-drawled Texan, to the billionaire oilman in the early stages of his career, to the audacious corporate raider in the 1980s. His latest incarnation was supposed to be that of visionary wind farm developer.

But dreams of building the largest wind farm in the world have gone up in smoke, as Pickens recent struggles have come to personify the fortune of the wind market in 2009.

Only one year after overtaking Germany as the world's largest wind-power generator, with $16 billion worth of investment according to consulting firm Emerging Energy Research, the United States has seen its wind market momentum drop dramatically.

Pickens recently called off plans for his $10 billion behemoth spread across the Texas Panhandle, citing several factors that forced him to alter his plans, including lack of transmission lines and a fall-off in the price of natural gas, with which wind competes as a power source.

"Does this mean we're taking a step back? Yes," says Ed Weston, director for the Great Lakes Wind Network. "But I dont think theres any question that the wind industry is going to be a significant growth industry for the next 20 years in the United States. This is just a short-term glitch."

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Part of the challenge lies in the fact that wind energy is a naturally capital-intensive, heavy manufacturing industry, stretched by long lead times. Because 2008 was a record year, many installations continue to forge ahead in 2009. According to Emerging Energy Research, an estimated 6,500 megawatts of total wind power capacity has been added in the United States in 2009, down from 8,546 in 2008.

"About 4,000 of those megawatts that will be installed this year were actually projects that had difficulty getting financing toward the end of 2008 and were meant to come online then," says Matthew Kaplan, a senior analyst for the North American wind energy markets for Emerging Energy Research. "There's going to be a very small amount of new plants actually installed this year."

But that perception is relative.

American Wind Energy Associations Liz Salerno points out that through the second quarter of 2009, the U.S. wind industry has already outpaced itself from the same point a year ago.

What happens in the foreseeable future could well be determined by new legislation. Last month, Steve Chu, the secretary of energy, announced $14 million for wind research, while two provisions in the federal stimulus package provide money for new projects on the ground.

Until this year, the primary engine to private finance was tax credits. But during the economic shock of last winter, Emerging Energy Researchs Kaplan says, that pool of cash dried up. The stimulus package allows financiers to convert the tax break into upfront payments. Rules for applying were clarified in recent weeks, allowing firms to begin bidding.

There has already been some positive momentum moving forward. New York-based Terra-Gen Power secured funding to purchase 100 General Electric 1.5MW wind turbines, which will be deployed at its Alta Wind I project in the Tehachapi area of California. Meanwhile, San Francisco-based NaturEner USA LLC closed a $117.5 million construction loan to build a massive wind farm outside Ethridge, Mont.

"We've seen a lull right now in orders, but that's not to be mistaken for a change in the long-term market," says Great Lake Wind Network's Weston. "The real question for America's manufacturers is not whether the wind market will grow, but whether they are going to participate or are the turbines and components going to have to come from off-shore?"

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