US wind power slumps in 2013 after tax credit drives 2012 boom

NEW YORK CITY -- U.S. utilities agreed to buy 7.6 gigawatts of wind capacity this year through September, as construction in 2013 slowed to a trickle after a federal tax credit expired at the end of 2012, the American Wind Energy Association said.

About 70 megawatts of wind farms were connected to the grid in the third quarter, a 96 percent decline from a year earlier, according to a report today from the Washington-based trade group. Developers rushed to complete projects last year to qualify for the production tax credit, leaving few wind farms in the construction pipeline this year. The credit expired Dec. 31 and received a one-year renewal the next day as part of a U.S. budget deal.

“We knew the slow-down was coming when the PTC expired and here it is,” Elizabeth Salerno, AWEA’s chief economist, said in an interview. “The good news is that utilities are signing new contracts faster than I’ve seen in a long time.”

Developers installed 13.1 gigawatts of wind capacity last year, surpassing natural gas plants for the first time to become the largest source of new U.S. electricity. Utilities agreed to purchase wind turbines or signed contracts to buy power from wind farms with total capacity of 7.6 gigawatts in the first three quarters of the year.

Power prices for some of those contracts were as low as $25 a megawatt-hour, cheaper than any other new sources of electricity, Salerno said. That’s prompting companies to buy more capacity than they initially planned when issuing requests for proposals. “Some utilities issued their RFPs but then signed up for double or triple the amount,” Salerno said. Wind farms that begin construction by the end of 2013 will qualify for the 2.3 cent a kilowatt-hour tax credit.

Copyright 2013 Bloomberg

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