The Rise and Fall of the Wind Industry

By Editors

Brad Plumer says the rise and fall of the wind industry can be illustrated in one chart. This is it. The chart shows windmill production by year since 1992. The horizontal axis is time. The vertical bars show new capacity each year in gigawatts, with the scale in blue on the left. The green line running upward across the chart is total national capacity, also in gigawatts. The scale is different from the annual increments and is measured in green on the right. What the chart illustrates is an industry whose growth that has been driven entirely by mandates and subsidies without any role for market forces. The federal production tax credit was adopted in 1992 but the first windmills did not appear until 1994 when Minnesota adopted the first state mandate requiring utilities to incorporate renewable sources of generation. Nothing much happened after that until Texas adopted a state mandate in 1999. But the PTC was allowed to lapse that same year and in 2000 windmill construction fell off a cliff, as it has every time the tax credit has expired. Since 2000 so-called "renewable portfolio standards" have been adopted in half the states and this has prompted an upsurge in construction. But the production tax credit was renewed on a two-year cycle and every time Congress allowed it to lapse, construction dropped dramatically. In 2009, Congress changed the incentive by allowing wind developers to choose between the production tax credit and a 30 percent investment tax credit. This meant windmills could produce a tax saving even if they never produce a kilowatt of electricity. Construction fell in 2010 because of the recession but recovered somewhat in 2011. Now Republicans in the House of Representatives are trying to end the PTC altogether and return the economics of wind to the market forces. Just in anticipation the wind industry has put half its projects on hold and there have been widespread layoffs. Stay tuned. The issue will be decided by January 1.

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