When investor Boone Pickens put a hold on a huge wind power project in the Texas Panhandle that he had announced in the spring, he wasn't alone.

A number of wind power developers and researchers say the ongoing credit crisis, together with transmission congestion in West Texas and falling natural gas prices, will slow the state's breakneck expansion of wind capacity. Texas is the No. 1 wind power state, with more than 6,000 megawatts of capacity in operation and just over 8,000 megawatts expected by year's end.

The industry has experienced three slowdowns before, all directly tied to temporary lapses in the federal tax credit for renewable energy. The credit currently amounts to 2.1 cents per kilowatt-hour, and is so critical that when it expired in 1999, 2001 and 2003, wind construction dropped 73 to 93 percent the following years, according to the American Wind Energy Association.

But that won't happen this year. Congress last month extended the production tax credit, which would have expired at year's end, through 2009.

"This slowdown will be unique from the other three," said Josh Magee, research director at Emerging Energy Research in Cambridge, Mass.

This time, the drivers will be financing and price competition from natural gas, Magee said. Gas is a major component in the generation of electricity.

Other wind developers add that transmission constraints between wind farms and the major demand areas, such as North Texas, are also important. Wind capacity has been built so fast in West Texas that at least some output is curtailed roughly every other day of the year.

Pickens talked about his wind plans last week at an industry conference in Phoenix, where he said the 50 percent drop in natural gas prices since summer posed a challenge to wind energy. He also has said financing has dried up for the moment.

It's no surprise that a $12 billion project like Pickens' would face a challenge raising money in today's market. But there also is a peculiar wrinkle in wind power's finance that makes the current environment doubly challenging.

"Most wind projects in the U.S. are funded by investors with an appetite for tax benefits," said David Groberg, vice president of Invenergy Wind, a Chicago-based company with 690 megawatts of wind capacity in Texas.

Those investors in effect become the owners of the project, giving them the right to claim the federal income tax credits for perhaps a decade before returning ownership to the project developer. It's called a "tax-equity" model.

Through October, wind farms in the Electric Reliability Council of Texas, which manages the transmission grid covering about 85 percent of the state, produced nearly 12.1 million megawatt-hours of electricity. At 2.1 cents per kilowatt-hour, that translates into $253 million of tax credits.

The problem: No income, no benefit from an income tax credit.

And many of the most active wind investors were big Wall Street firms and commercial banks, including the defunct Lehman Brothers investment bank, insurer and bailout-target AIG, and Wachovia Corp., whose merger with Wells Fargo & Co. is pending.

"You're going to see a dramatic slowdown in Texas," Groberg said.

"If you asked me to predict, I would imagine most developers are looking for a way to hold on to their projects, but delay them," he said. He puts his own company in that group.

Less likely to be affected by the financing crunch are big utilities that can use the credits themselves.

That includes Dallas-based Luminant Generating, part of Energy Future Holdings, and its partner Shell WindEnergy. The companies last year announced plans for as much as 3,000 megawatts of wind power in Texas.

In the same category are BP Wind Energy and its partner, NRG Energy, who in October said they commenced operations at a 150-megawatt wind farm in Pecos County. The company in September launched another, 60-megawatt wind farm 80 miles southwest of the Metroplex.

But the nation's largest wind operator, FPL Energy, said recently it was trimming $1.3 billion worth of new projects in response to market conditions.

From Walt Hornaday's perspective, however, all developers, large and small, are affected by transmission constraints.

"That's the biggest problem facing the wind market, the lack of transmission," said Hornaday, president of Cielo Wind Power in Austin.

Groberg agreed.

"We saw a slowdown in the development rate in ERCOT even before natural gas prices started to come down, due to the lack of electrical transmission," he said.

The Public Utility Commission of Texas in July approved a plan to spend about $5 billion in coming years to build 2,400 miles of transmission lines to carry up to 18,000 megawatts of renewable power to users. The PUC is scheduled to begin hearings next month to determine who will build the lines exactly where in the state's Competitive Renewable Energy Zones, commonly called CREZ.

Tim O'Leary, spokesman for Houston-based Shell WindEnergy, said his company's project with Luminant is synchronized with CREZ, so it shouldn't face transmission constraints.

But Hornaday said he and other operations with projects on the ground need more transmission capacity right now.

"It creates a cloud over financing projects" when investors hear about wind being shut out of the ERCOT grid because of transmission constraints, he said.

Kent Saathoff, vice president of system planning and operations at ERCOT, said the problem is that wind power can be built much faster than a major transmission project. Whereas a wind farm might take a year to put in place, big high-voltage power lines can take five to eight years to build.

"Right now, we can accommodate about 4,500 megawatts of wind. Unfortunately, we had more than 6,000 megawatts now," Saathoff said. "If the wind's blowing really hard, we can't accommodate all the wind being generated."

From January through August this year, he said, ERCOT curtailed wind power somewhere on its system between 45 and 50 percent of the days. When curtailments occurred, they averaged between 140 and 150 megawatts of capacity, he said.

Next year, a stretch of line between Abilene and Graham is expected to be the most critical bottleneck in the grid, Saathoff said. A number of wind farms are just west of Abilene.

Magee called the CREZ project "a good step," but said it needs to proceed without interruption.

"The wind developers need a clear idea of how much capacity they've got" to work with, he said.

As it currently stands, he and others pointed out, at times there is so much wind power trapped in West Texas that power prices in ERCOT's West zone fall below zero. That can happen because wind projects can actually pay customers to take their power, because the developer can always claim the production tax credit.

The oversupply of wind also accounts for the West zone sporting the cheapest electricity rates among the state's four major zones.

Just how much wind growth slows in Texas and the nation will depend largely on the financial markets, Magee said. Next year, about 10,000 megawatts of new wind power was scheduled to be added to the nation's current supply of more than 21,000 megawatts, he said.

"It appears that about 60 percent of that is being planned by companies that depend on tax-equity financing," Magee said. So next year's additions largely depend on the recovery of the financial markets, he said.

If there's a breath of good news in the slowdown, it's that the price of wind equipment is softening and backlogs are shrinking.

Not long ago, Cielo faced an 18-month wait after ordering wind turbines, Hornaday said. A turbine is the assembly that includes the generator and the blades.

"Now it's maybe 12 months," he said. And that's faster than it sounds, he said, because it takes about nine months to manufacture the equipment.

Magee said that in the past four years, the cost of wind turbines rose about 80 percent altogether. And the turbine makes up about 70 percent of the total cost of an installation, he said.

As projects are deferred or canceled, he said, cost increases likewise will slow or fall.

Jack Zedlitz, spokesman at Green Hunter Energy in Grapevine, said "pricing on turbines has declined dramatically, and availability has improved dramatically."