Subject: FT.com / Energy - Gas threat to wind farm growth
From: "Eric Schwerin" <[email-masked]>
To: "Hunter Biden" <[email-masked]>, "Michael Muldoon" <[email-masked]>, "Devon Archer" <[email-masked]>
Date: Mon, 23 May 2011 11:41:29 -0400

http://www.ft.com/intl/cms/s/0/4eedb5bc-8490-11e0-afcb-00144feabdc0.html?ftcamp=rss&ftcamp=crm/email/2011523/nbe/GlobalBusiness/product#axzz1NBsNBTtl

Gas threat to wind farm growth

Construction of new wind farms in the US is set to decline next year because of competition from cheap natural gas for power generation, the country’s largest developer of new wind power projects has said.

Ignacio Galán, chief executive of the Spanish energy group Iberdrola, said the rise in US shale gas production had transformed the country’s energy industry, driving down gas and electricity prices. “Shale gas makes the production of electricity from other sources not attractive enough,” he said.

Installations of new wind capacity in the US dropped from 10,000 megawatts in 2009 to 5,100MW last year. Mr Galán said he expected there could be a further 5,000MW added this year, and perhaps as little as 3,000MW next year.

Government support for wind, which includes federal tax credits and legal standards for renewable generation adopted by 29 states, was adequate, he said, but added: “It’s hard to make an attractive return on investment at these prices.”

Several analysts and industry executives were less downbeat than Mr Galán, with some believing that new capacity additions will pick up next year.

Lisa Frantzis of Navigant, a consultancy, said that falling turbine prices meant new wind farms were now competitive on costs with new gas-fired power plants.

“Wind is one of the more attractive options for complying with states’ renewable energy mandates,” she said.

However, Mr Galán’s caution is a sign of the challenges still facing the US wind industry, which include uncertainty over the longer-term future of tax credits given the pressure on the federal budget, and generally weak electricity demand as the economy slowly emerges from recession.

The American Wind Energy Association, which began its annual conference in California on Sunday, estimates that employment in the industry fell by 10,000 jobs last year, to 75,000.

Alex Klein of IHS Emerging Energy Research, a research company, said he expected new installations to remain at about 5,000MW per year, and said: “It’s going to be very challenging for the next couple of years. There are a lot of issues hitting the industry.”

Iberdrola is the largest investor in new wind capacity in the US, and the second-largest wind generator, after NextEra Energy, the owner of Florida Power & Light. Other leading companies in the US wind market include MidAmerican Energy, owned by Warren Buffett’s Berkshire Hathaway, EDP of Portugal and Eon of Germany.

Eric D. Schwerin
Rosemont Seneca Partners, LLC
1010 Wisconsin Ave., NW
Suite 705
Washington, DC 20007
(202) 333-1880
[email-masked]
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