Increased European Interest Reveals Continued Growth in U.S. Wind Energy Market

May 03, 2007 by Jeff Shepard

The recent announcement by Acciona (which claims to be the world’s largest wind power developer) that it will develop its first wind turbine production plant in the United States has brought renewed attention to the continued growth of the American wind energy market. The project, to be located in Iowa, represents an investment of nearly $23 million and will produce approximately 250 wind turbines in 2008, a figure that is expected to rise over the next few years. Acciona’s plant will supply wind turbines for wind farms located throughout North America and will provide the company, when it is operating at full capacity, with worldwide production capacity of approximately 1,740 wind turbines for a total of 2,610MW per year.

As the continued concern over the environment, coupled with technological advances and government initiated tax incentives, "empowers" more Americans to consider "alternative" energy options, European wind energy companies are entering the U.S. market with increased confidence. Besides the latest announcement by Acciona, EDP Energieas de Portugal SA recently announced an agreement to purchase Horizon Wind Energy LLC (based in Houston, Texas) for $2.15 billion, which would be the Portuguese utility’s first entry into the U.S. market. Vestas Wind Systems of Denmark, the world’s largest wind-turbine maker, announced that it would build a $60 million wind-turbine factory in Colorado, which will be the company’s first manufacturing plant in the United States.

In its evaluation of the domestic market, the American Wind Energy Association (AWEA) reports that wind power generating capacity increased by 27% in 2006 and is expected to increase an additional 26% in 2007, proving wind is now a mainstream option for new power generation.

The U.S. wind energy industry installed 2,454MW of new generating capacity in 2006, an investment of approximately $4 billion, billing wind as one of the largest sources of new power generation in the country – second only to natural gas – for the second year in a row. New wind farms boosted cumulative U.S. installed wind energy capacity by 27% to 11,603MW, well above the 10,000MW milestone reached in August 2006. One megawatt of wind power produces enough electricity to serve 250 to 300 homes on average each day.

Wind energy facilities currently installed in the U.S. are expected to produce an estimated 31 billion kilowatt-hours annually or enough electricity to serve 2.9 million American homes. It is claimed that this source of electricity will displace approximately 23 million tons of carbon dioxide – the leading greenhouse gas – each year, which would otherwise be emitted by coal, natural gas, oil and other traditional energy sources.

Wind power has also attracted the support of state and federal government legislatures. The U.S. Congress recently extended the federal production tax credit (PTC) through December 2008 to further expand the number of wind farms throughout the U.S. Furthermore, legislation was put forward in the Senate in February that would allow purchasers of a small wind system to receive a credit on their taxes for a portion of the turbine’s cost. The "Rural Wind Energy Development Act" (S. 673) would provide a federal tax credit of $1,500 per 1/2kW of capacity to purchasers of small wind systems nationwide. This five-year credit would apply to all wind systems with capacities of under 100kW used to power individual homes, farms, or small businesses.

The bill would also allow the credit to be carried over – meaning that in the event that using the credit reduces the consumer’s taxable income below the minimum threshold, the unusable excess credit would be carried over to the next tax year. This provision essentially allows a consumer with a low annual income to take full advantage of the credit. The bill would also provide for an accelerated depreciation of three years for small wind turbines.

According to the Global Wind Energy Council (GWEC), the United States (11,603MW) ranks third in total installed capacity behind German (20,621) and Spain (11,615), and the U.S. was the global leader in new installed capacity at 2,454MW (ahead of second-place Germany’s total of 2,233.