For wind-energy companies across the U.S., the pace of business in 2008 may depend a lot on dealmaking in Washington.

The latest round of debate, centering on an economic stimulus bill, has taken the wind out of them. The extension of a key tax credit for wind energy set to expire at the end of 2008 was left out of the economic stimulus package, reviving uncertainty about expansion of the renewable power source at a time of record-high prices for traditional energy.

Companies receive tax credits of 2 cents per kilowatt hour of energy generated by each newly installed wind turbine. The tax break puts generation costs on par with the cost of energy from coal- or gas-fired power plants in areas with high wind speeds, according to the American Wind Energy Association.

While more than 3,000 new turbines were installed in 2007, concern about the expiration of the tax credits underscores the economic limitations of this form of alternative energy, although supporters say wind power eventually will be competitive without the help of tax credits.

"I don't think the industry needs to be subsidized forever, but it needs a period of several years so that we can get the cost per kilowatt hour down to a very reasonable amount," said Richard Morrison, chief executive of Molded Fiber Glass Cos., which provides wind blades for General Electric Co.'s (GE) GE Energy, a maker of wind turbines. "We've been making progress on that but only if you can work on a steady, long-term basis versus on-again off-again."

In the meantime, the longer Congress delays extending the tax credits, the greater the odds that business will begin to slow. The AWEA, a trade group, last week released a chart showing that the installation of wind-energy projects dropped in 2000, 2002, and 2004, after Congress allowed the tax break to expire.

In 2000 alone, installations fell by 93%, after the tax credit expired in June 1999 and Congress waited for six months before renewing the break. Congress also allowed the tax credit to expire in 2001 and again in 2003, with the result that the installation of wind-power projects dropped by about three-fourths the following years.

"There has typically always been a downturn in the business with the uncertainty about the extension," said Jerry Grundtner, the vice president for project development at Mortenson Construction, a Minnesota company that builds wind projects on behalf of other companies. "As a result, we have generally had to make ourselves a conscious decision not to expand without knowing for certain that there will be an extension."

Managing With Uncertainty

For now, business still expects Congress to act. Last week, after House Democrats and the White House left an extension of the wind-production tax credit out of the economic stimulus bill, Senate Majority Leader Harry Reid, D-Nev., said that he planned to move a separate energy-related tax bill.

But the uncertainty about when the extension will be approved means that businesses are taking something of a risk by going forward with plans, industry officials say. That is because the tax credit, which applies for 10 years to each newly installed wind turbine, only takes hold once wind generation begins. As a result, any projects that aren't completed this year are at risk of losing out on the tax break.

"People can't plan on facilities, they won't invest in technology, they won't invest in the long term with the uncertainty," Morrison said. While the company is in the midst of building a new facility because it is optimistic about its prospects, "it worries us," he said.

One factor that may help prop up the wind industry this time around - even if Congress delays acting - are mandates in about two dozen states that are gradually beginning to take effect requiring utilities to generate a certain share of their power from renewable energy. California, for example, requires utilities to generate 20% of power from renewable sources by 2010, according to the Edison Electric Institute, a trade group for utilities.

Wind companies could also could benefit as Democrats use election-year speeches to promote the renewable-energy industry as a source of high-paying jobs that could make up for job losses in manufacturing.

But, executives say, tax credits play a special role.

"We've grown considerably in the last couple of years because we've had certainty that there's business ahead of us," Grundtner said. "What we're a little cautious about is whether we continue expanding here."