Wind Industry Leaders Applaud ARRA, Express Concern Over PPAs

1/20/2009

Florida, United States. The federal stimulus package has been successful in helping to get the wind power industry through 2009's economy-wide woes, but market challenges remain and policy issues require immediate attention, panelists and speakers said at this year's AWEA Wind Energy Fall Symposium in Orlando, Fla.

“The [American Reinvestment and] Recovery Act (ARRA) really has been a fantastic tool” at keeping the industry on track, said Jan Kjaersgaard, vice president at turbine producer Siemens Wind Power America.

At the conference industry executives painted a 2009 picture that turned out to be far better than expected. At this time last year, Horizon Wind Energy's parent, EDP Renewables, was in the process of assessing whether to shift a sizable portion of its investment capital earmarked for the U.S. to other countries after the credit crisis and the devaluation of the production tax credit (PTC) slammed the industry. But then in February Congress passed ARRA, which contained several measures intended to have a positive impact on the industry, including one providing federal loan guarantees as well as the all-important grant program designed to counteract the PTC’s lost value in the flagging economy.

The other piece of the ARRA story, panelists agreed, was the swift implementation of the legislation by the notoriously plodding federal government. The Obama Administraton and federal government as a whole showed “an amazing ability to deliver,” said Horizon CEO Gabriel Alonso. Kjaersgaard echoed that sentiment, calling the implementation “a fast reaction.”

Panelist Matt Rogers, senior advisor to Secretary of Energy Stephen Chu for the Recovery Act, had to have been pleased with such comments coming from the other presenters. Rogers said that the renewables component of ARRA should be viewed as a “down payment” on the energy and climate challenges that need to be solved in the next decade. “Today, perhaps for the first time ever, we have energy policy aligned with environmental policy” with resources to go along with it, he said.

Nevertheless, “Not everything is wine and roses,” as Alonso said, for the industry faces serious challenges both now and in the near future. One troubling market dynamic echoed throughout the conference is the difficulty in securing power purchase agreements, in part as a result of soft natural gas prices.

While on the panel, Rogers had the chance to hear, straight from leading industry players, concerns about the grant program, which is available to projects on which construction is started by the end of 2010 and that are online by the end of 2012. That 2010 construction deadline is right around the corner, and it’s “already causing a lot of our customers and us concern right now,” said Kjaersgaard.

An improvement would be to remove the 2010 deadline and simply allow projects going online by 2012 to be eligible, said panelists. In spite of such challenges, panelists generally expressed optimism for the coming years.

Speakers also stressed the importance of getting a national renewable standard on the books. While the industry should continue to post respectable numbers through 2010, “We believe that the market will recover even more and get back to 2008 numbers” in the 2011 and 2012 timeframe, said Kjaersgaard.

In order for that momentum to continue, however, demand for wind power must be further cemented via a national renewable electricity standard, said panelists, who drew a strong link between such policies and job creation, particularly given the global nature of the market. The Department of Energy’s Rogers said that the goal is for the U.S. to be the world leader in renewable energy manufacturing, and therefore welcomed the input from industry panelists, who urged that strong and stable policies be quickly put in place so that the U.S. can become an industry hub. A global footrace is now under way, and so the U.S. needs to respond, panelists agreed.

“In my view the window is short” for the U.S. to establish itself as a leader, said Dirk Matthys, CEO at Gamesa Wind Us.