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Wind power hits the doldrums

CHARLESTON, W.Va. - New wind energy projects stalled when financing dried up during the Great Recession. Now new projects have hit turbulence because an important federal tax credit is set to expire.

Five projects were completed in West Virginia before troubles beset the industry. The projects have a combined capacity of 583 megawatts. Whether that is a lot or a little depends on your perspective.

The "it's a lot" school would boast that the projects are generating enough electricity to power 135,000 homes.

It's estimated the projects directly and indirectly support more than 100 jobs, pay almost $1.7 million annually to landowners, and pay about $850,000 annually in property taxes.

Jeff Herholdt, director of the state Division of Energy, said, "In some of our rural economies, these wind projects are the largest contributors to property taxes. These installations are worth tens of millions of dollars. When it comes to property taxes, they are significant taxpayers. This really stands out in our rural counties. Some rural counties don't have large employers or many businesses worth $50 million to $150 million."

West Virginia ranks 20th among the states in wind energy generation and fourth among states east of the Mississippi, according to the U.S. Department of Energy.

The "it's a little" school would point out that 583 megawatts is a fraction of the 10,394 megawatts installed in Texas, the nation's wind power generation leader.

It is estimated that wind power provides just 1.4 percent of West Virginia's electricity. In contrast, it provides more than 22 percent of South Dakota's power.

According to the American Wind Energy Association, an industry trade group, West Virginia still has a lot of potential. The association estimates West Virginia could generate 1,883 megawatts of power if the resource were fully developed.

"The key for expansion of the wind business has been retaining the 2.2 cents production tax credit," Herholdt said. "That's roughly equal to half of the wholesale cost of electricity. This is fundamental to them.

"With all of the concerns about the budget, there's no path forward for continuation of the credit," he said. "Some seem confident it will be extended. Some are not so sure."

It has been estimated that the credit costs about $1 billion a year.

The American Wind Energy Association cites a study by Navigant Consulting that estimates extending the credit for four years would result in 95,000 wind-related jobs and $16.3 billion in investment but a failure to extend it would cost more than 37,000 jobs and $10 billion in investment next year.

The credit is set to expire Dec. 31. For owners to claim it, their projects must be online by that date.

The credit has been an on-again, off-again thing. "There have been some years we didn't have it," Herholdt said. "That's when wind development fell off the cliff."

The business is falling off a cliff now as equipment suppliers anticipate a drop in orders. Example: Siemens said earlier this month it would eliminate more than 900 jobs at wind turbine manufacturing plants in Iowa, Kansas and Florida. Companies have announced almost 1,700 layoffs in recent months, The New York Times reported on Thursday.

Susan Small, spokeswoman for the West Virginia Public Service Commission, said no wind project applications are pending in the Mountain State.

Numerous factors beyond financing and tax policy are a drag on wind energy.

For one thing, it's controversial. Numerous regulators have a say. One project, Beech Ridge in Greenbrier County, is only permitted to operate during daylight hours because spinning turbines at night threaten the bat population.

Also, wind is intermittent. It typically blows harder at night, which is after demand for energy peaks and companies can command the highest price.

Herholdt noted that it is a challenge to integrate intermittent power generators like wind and solar into the grid. One West Virginia wind project, AES Laurel Mountain, helped solve this problem by installing a $25 million, 32-megawatt battery - the largest installation of its kind.

Other challenges: Wind resources are often far from the existing grid and building a connection is expensive. Demand for additional power has waned since the Great Recession. And U.S. equipment manufacturers face stiff competition from low-cost foreign suppliers.

The price of wind power is an ongoing issue because, without the federal tax credit, it can't compete with the cost of electricity from conventional fuels. New technologies have allowed drillers to exploit the Marcellus Shale and other natural gas resources, creating a natural gas glut. The price of natural gas is so low, utilities that can switch from coal to gas are doing so.

In 2008 Appalachian Power agreed to buy the power generated by the Beech Ridge wind farm in Greenbrier County for 20 years. Herholdt said that in its submissions to the Public Service Commission, Appalachian Power has said that in 2015 its portfolio also will include power from wind projects in Illinois and Indiana.

"Why are they buying wind from Illinois and Indiana and not using our own wind?" Herholdt asked. "It's cost. The Public Service Commission must deal with cost and quality of utility services. That's the challenge of wind in West Virginia: It is much more expensive to build on ridge tops. That's why most of the projects that have been done are on surface-mined land."

The West Virginia Public Service Commission has approved two wind projects that have not yet been built. In addition, the owner of Beech Ridge is seeking to add more windmills.

Otherwise, the wind business in West Virginia appears to be slowing from a gust to a breeze.

Contact writer George Hohmann at business@dailymail.com or 304-348-4836.

 


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