THE BLOG
01/09/2013 04:30 pm ET Updated Mar 11, 2013

The Promises and Challenges of Wind Power in the US

While wind energy can seem like a near-ideal solution to our environmental and energy issues, it has not been without its challenges in the United States. It has not been, so far, a major component of the energy market. At the end of 2011, total wind energy production in the U.S. constituted 3.3 percent of total energy demand, according to the Department of Energy. Yet the industry has made several gains in the past few years, and the renewal of the integral tax credit will allow projects to continue. The DOE ambitiously projects wind energy to supply as much as 20 percent of U.S. electricity by 2030. Despite financial and logistical difficulties, the current pace of onshore and offshore production of wind farms indicates that this may be a realistic goal.

In the run-up to the fiscal cliff, many speculated whether the wind energy tax credit would be renewed. The production tax credit provides a 2.2-cent tax credit for each kilowatt-hour of electricity produced from large-scale wind farms. Experts agree that the credit acts an integral economic stimulant for the industry. According to the Penn State Wind Application Center, the tax credit has permitted the wind industry's nationwide capacity to grow from roughly 9,000 megawatts in 2005 to over 50,000 megawatts in 2012, which is enough to power 13 million homes. Luckily, it won out in the negotiations, along with the tax credit for solar energy. The most recent extension of the tax credit now covers wind farms that begin construction in 2013, not just those that go into operation this year, and will thus stem more growth in the industry. The tax credit is also attributed with helping to sustain jobs in the industry. The American Wind Energy Association (AWEA) estimates that the tax credit's extension will save as many as 37,000 jobs in the wind energy sector.

It is estimated that the tax credit would cost approximately $12.1 billion over the next decade, a quantity some legislators deem too costly for an energy source that is difficult to integrate into the power grid. Adapting it into the grid is one of the main issues facing renewable energy. Power plants tend to run a "predictable" amount of electricity daily, and consistently attempt to match what people TVs, appliances, computers, and their other electronic devices need. The problem with wind and solar energy is that they are "unpredictable" sources of electricity: the amounts of watts they produce are consistent only with wind speeds and the degree of sunlight received by panels. However, renewable energy developers are hopeful that they can modify the grid itself. Michael Goggin of the AWEA asserts that gird operators could possibly accommodate the vagaries of these renewables by moving power on the grid minute by minute, instead of hour by hour as they do now. If the power grid is modified to handle this precise flow of electrons, wind energy may be able to match more of our electricity needs.

Since 2005, worldwide wind energy manufacturers have branched into U.S. production of turbines. Seven of the leading global turbine manufacturers (Vestas, GE, Gamesa, Suzlon, Siemens, Acciona, and Nordex) now produce turbines in the U.S. However, doubts about the tax credit's longevity, combined with other economic difficulties, saw German-based Siemens lay off 945 workers in the U.S. last year, and Vestas, the world's largest turbine-manufacturer with operations in Colorado and Texas, lay off 1,400 workers globally. The relative lateness and uncertainty of the tax credit's extension has influenced some foreign companies to anticipate less investment in the United States. Vestas, for example, expects a significant "significant reduction in 2013 installations, relative to previous years," according to company spokesman Michael Zarin. The uncertainty of the tax credit's extension in 2014 and following years may hinder long-term potential growth by these companies. If Congress declared a longer standing commitment to the tax credit, Vestas and other companies might commit to longer-term investment in the U.S.

In the past few years, many have pointed to natural gas as a major source of new domestic energy. It also serves as a backup energy source for wind and solar power when weather conditions aren't ideal. In the development of newly installed sources, however, wind energy has overtaken natural gas. During 2012 the wind industry installed a whopping 44 percent of all new energy capacity in the U.S., compared to 30 percent for natural gas. In the past five years, cumulative wind energy capacity has constituted 35 percent of all newly built energy capacity.

Until now, U.S. wind energy development has only concerned onshore sources. The U.S. has yet to launch mass production of offshore wind farms. Onshore, wind blows most heavily during nighttime, during which we have overall less electricity consumption. Because offshore winds blow strongly 24 hours a day, they would deliver energy during the daytime, when electricity sells for a higher price in wholesale markets.

The Obama administration is looking to increase offshore production in key "wind energy areas," according to Interior Secretary Ken Salazar. In the DOE's new budget for 2013, seven offshore projects in six states, Texas, Delaware, Maryland, New Jersey, Virginia, Maine, and Ohio (which holds two projects off the coast of Cleveland), will each receive up to $4 million for startup costs. The DOE plans to select up to three of the projects and offer each up to $47 million to assist in their commercial operation for 2017.

The land-based U.S. wind energy sector has so far created over 75,000 jobs and has over 400 manufacturing facilities in 43 states. Since 2011, wind energy has composed more than 10 percent of energy output in five states: South Dakota (22.3 percent), North Dakota (14.7 percent), Iowa (18.8 percent), Minnesota (12.7 percent), and Wyoming (10.1 percent).

The DOE also estimates that the development of 54,000 MW of offshore wind projects in the U.S. could create more than 43,000 operations and maintenance jobs. Furthermore, if offshore plants go into production, the U.S. wind industry could support 500,000 American jobs by 2030. If the president's aspirations for the offshore projects prove fruitful, then the DOE's projections may be fulfilled. With sufficient R&D into offshore wind farms, the U.S. energy market could open a new chapter for the wind industry.