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Economic uncertainty puts the brakes on Northwest wind power industry

Nationally, wind energy producers face competition from falling natural gas prices. Plus, it's unclear whether a much-relied-upon federal tax credit for wind energy producers will be renewed. ...Regionally, transmission lines are at capacity in some places. Markets are getting tougher. Also, wind farm operators complain that property taxes have risen steeply under a new state formula.

After a decade of whirlwind growth, Central Washington's wind industry has put all new construction on hold after being confronted by a mix of national and regional issues.

At least seven permitted projects are up in the air in Kittitas and Klickitat counties.

It's a matter of economic uncertainty.

Nationally, wind energy producers face competition from falling natural gas prices. Plus, it's unclear whether a much-relied-upon federal tax credit for wind energy producers will be renewed after it expires Dec. 31.

Regionally, transmission lines are at capacity in some places. Markets are getting tougher. New wind farms will encounter problems selling to California utilities, which under new rules must now buy more power produced in that state. Also, wind farm operators complain that property taxes have risen steeply under a new state formula.

In recent years, construction boomed in Klickitat County, and in Kittitas County to a lesser degree.

"The hotels were full. Local contractors were employed," said David McClure, economic development director for Klickitat County.

Even after the economy began its nose-dive in 2008, the county's economy was... more [truncated due to possible copyright]  

After a decade of whirlwind growth, Central Washington's wind industry has put all new construction on hold after being confronted by a mix of national and regional issues.

At least seven permitted projects are up in the air in Kittitas and Klickitat counties.

It's a matter of economic uncertainty.

Nationally, wind energy producers face competition from falling natural gas prices. Plus, it's unclear whether a much-relied-upon federal tax credit for wind energy producers will be renewed after it expires Dec. 31.

Regionally, transmission lines are at capacity in some places. Markets are getting tougher. New wind farms will encounter problems selling to California utilities, which under new rules must now buy more power produced in that state. Also, wind farm operators complain that property taxes have risen steeply under a new state formula.

In recent years, construction boomed in Klickitat County, and in Kittitas County to a lesser degree.

"The hotels were full. Local contractors were employed," said David McClure, economic development director for Klickitat County.

Even after the economy began its nose-dive in 2008, the county's economy was buoyed by construction of several new wind farms.

"It's leveled off. The construction has stopped," he said.

While companies cite multiple reasons, the bottom line is the same for all: Changes in regulatory and market conditions have created uncertainty for the projects' economic viability.

"The industry is sort of holding its breath for another slowdown," said Jan Johnson, spokeswoman for Iberdrola Renewables, a clean-energy company based in Portland. The company, which is owned by Iberdrola, S.A., a Spanish utility company, operates three Klickitat County wind farms that can produce more than 400 megawatts of energy, enough to power more than 130,000 homes.

Given the uncertainty, Iberdrola Renewables decided to wait to build Juniper Canyon II, a permitted 101-megawatt wind farm planned for Klickitat County.

The low price of natural gas has pushed down electricity costs across the country, Johnson said.

That has made the federal Production Tax Credit, or PTC, that much more important. Under the tax credit, which began in 1993, renewable energy producers receive a tax credit per kilowatt hour created - 2.2 cents for wind producers - for the first 10 years of a project's operations. The credit allows them to charge a more competitive rate for utility companies that buy their electricity.

It isn't clear if Congress will approve an extension, or if it does, if it will be vetoed. President Barack Obama wants an extension, but Republican challenger Mitt Romney said he would veto any such extension.

"Everything is on hold because of the PTC," said Debbie Strand, president of WindWorks! Northwest, a wind energy advocacy group based in Ellensburg. Strand also works as a consultant on permitting issues for wind power projects.

Cannon Power Group, a San Diego-based renewable energy producer, has put all new projects, including a 100-megawatt wind farm in Klickitat County, on hold until the PTC and the regional issues are resolved, Gary Hardke, the company's president, said.

Cannon Power Group had planned to sell power from its Klickitat County project that is on hold to California utility companies, but changes to California state law in 2011 required those companies to buy more renewable energy from in-state power plants.

That left Cannon Power Group without a market to sell the energy from the wind farm if it built it, Hardke said. "There really wasn't much of a market for a renewable energy project in Washington or Oregon."

Even if the company built the wind farm, it wasn't clear that it would always be able to put the energy produced into the transmission grid that connects the West Coast, he said.

The power grid in Klickitat County along the Columbia River is essentially overloaded during peak times - when the wind is blowing and the river is flowing. The grid's administrator, the federal Bonneville Power Administration, started two years ago to limit how much energy producers can put into the system at peak times. Since the limits depend on wind and water flows, producers don't know ahead of time how much their operations will be affected, Hardke said.

The uncertainty is already having economic effects. Demand for new wind turbines has dried up, and several manufacturers of the soaring towers say they will have to slash their workforce.

Washington's only wind turbine manufacturer, Katana Summit, said last month that it would close its Ephrata plant if no buyer can be found. The company is also seeking a buyer for its plant in Columbus, Ohio, where it is based.

In announcing the potential closure in a statement, Katana Summit's CEO and president, Kevin Strudthoff, unequivocally blamed the industry's woes on the impending end of the PTC.

The economic effect goes beyond turbine manufacturers, said Robert Kahn, executive director of the Northwest and Intermountain Power Producers Coalition.

It means less work for their suppliers and construction companies that install the turbines, he said.

It isn't clear exactly how many jobs could be affected. Renewable Northwest Project, a Seattle-based advocacy nonprofit group, estimates that the industry has already provided 4,809 construction jobs and 929 operating jobs in Washington.

But most wind farms create very few direct operating jobs.

For example, Puget Sound Energy's Wild Horse Wind and Solar Facility in Kittitas County supports about 30 jobs, according to Brian Lenz, the utility's government and community liaison for Central and Eastern Washington.

The project cost about $480 million, and PSE pays about $1.2 million in local and state taxes on it each year, Lenz said.

Both of PSE's two wind farms in Washington are economically competitive, even without the PTC, company spokesman Roger Thompson said.

The utility won't have to find out, though, because projects that have qualified for the credit before it expires will receive it for the full 10 years.

Opponents say the tax credit supports a nonviable industry.

"If wind energy is too expensive to produce, then don't produce it," said David Kreutzer, an economist with the Heritage Foundation, a conservative think tank in Washington, D.C.

Wind energy advocates say the tax credit only levels the playing field with other energy sources, which all get some kind of federal support.

But Kreutzer and other critics argue that the industry receives far greater public support than other energy sources.

Both sides accuse the other of skewing and cherry picking their data.

U.S. Rep. Doc Hastings, R-Pasco, wouldn't say if he supports or opposes extending the credit, which was created under the Energy Policy Act of 1992.

If Congress votes on an extension, it will almost certainly be part of a larger bill, and his vote would be based on the entire bill, Hastings said.

He has voted for and against bills with provisions benefitting the wind industry.

Hastings said he supports using all energy sources, "but at the end of the day, it has to be competitive."


Source: http://www.yakima-herald.co...

OCT 16 2012
https://www.windaction.org/posts/35168-economic-uncertainty-puts-the-brakes-on-northwest-wind-power-industry
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