Wind industry uses federal grants to add capacity

WASHINGTON, D.C. - Armed with nearly $1 billion in federal grants, wind farm developers installed more capacity and got projects off the drawing board in the third quarter. Yet turbine manufacturers struggled amid excess supply, a trade group reported.

The 1,649 megawatts of capacity installed from July through September — enough to serve the equivalent of 480,000 average households — was about 18 percent more than the year-ago quarter, the American Wind Energy Association said.

Turbine manufacturing production was less than 50 percent of what it was in the third quarter of 2008 due to a surplus in the market, said Elizabeth Salerno, the group's director of industry data and analysis. She did not have specific production figures.

The results indicate how much companies are relying on federal grants to pull the nation's battered wind industry out of the recession because other financing avenues remain difficult to access.

"It's pretty much the grant program," Salerno said. "That really allowed projects to go out, raise capital, close deals, leverage debt... without the grants, it would be more difficult to raise capital."

Renewable energy is a small fraction of all electricity used but has gained favor globally as governments and businesses seek to curb pollution and the use of fossil fuels.

The industry lost momentum as access to credit markets dried up, natural gas and oil prices fell and electricity demand diminished. Some companies shelved plans and cut jobs.

Many believe the industry will see immense growth as utilities push to meet mandates to provide a percentage of electricity from renewable resources.

Third-quarter installed capacity came from projects in the planning stages when the recession hit, forcing companies to shelve projects and lay off workers when credit became scarce.

In addition, companies also started construction on farms with a capacity of about 1,700 megawatts in the third quarter.

With the activity have come jobs for construction workers, and wind farm operations and maintenance workers, Salerno said.

There is between 4,000 megawatts and 6,000 megawatts of excess turbine manufacturing available worldwide, much of it in China, said Ethan Zindler, who heads the North American research arm of London-based New Energy Finance.

Manufacturers should see business pick up once more wind projects are under construction next year, he said.

For example, Nordex USA Inc. broke ground last month on a $100 million manufacturing facility in Jonesboro, Ark. It plans to hire 700 employees by 2014.

Mitsubishi Power Systems Americas Inc. this month announced plans to invest about $100 million in a turbine manufacturing facility in Fort Smith, Ark., which could employ up to 400 when it is in operation.

The U.S. earmarked about $66 billion in stimulus money for renewable energy, including wind, but more than 80 percent has yet to be allocated, New Energy Finance has estimated.

The government delivered $964 million in place of tax credits to wind farm companies in September. The grants were equal to one-third of the project cost and the companies then raised the rest of the money from lenders.

The lending environment has improved, although banks are requiring more from wind companies, such as issuing shorter-term loans, Zindler said.

For the year, the industry is expected to expected to produce about 6,000 megawatts of new capacity, short of last year's 8,358 installed megawatts.

Wind power capacity operating in the U.S. is more than 31,000 megawatts, which generates enough electricity to serve the equivalent of nearly 9 million homes, the trade group said.