U.S. Congress Breaths Life into Wind Energy

The U.S. government announced this week it was issuing a request to see whether or not there was any competitive interest in leasing more than 100 square miles of an area off the coast of Long Beach, N.Y., for wind development. Plans spelled out by the New York Power Authority could open the door for 350 megawatts of renewable energy for area consumers. The federal government said the measure was part of the Obama administration's "all-of-the-above" energy strategy that envisions a diverse resource base. Political intransigence over a federal budget deal, however, nearly brought the fledgling U.S. wind energy sector to a standstill.

NYPA proposed a site about 11 miles off the coast of Long Beach for a wind farm the Bureau of Ocean Energy Management stated could expand to 700 MW. The agency said it was looking to determine whether or not there was enough interest in the commercial project to issue a lease on a competitive basis, or go ahead with a non-competitive lease for 127 square miles offshore.

U.S. lawmakers, in a last-minute deal, averted sending the national economy over the so-called fiscal cliff with deep budget cuts and high tax increases. Including in the congressional debate was the fate of a federal tax credit for wind energy. Some in the industry worried over the fiscal package to the degree that they stopped hiring as negotiations pushed into the final hour. With a deal in hand, however, wind developers can start moving forward on the late season wind-energy push by the Obama administration.

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The BOEM in mid-December announced it received a request from the Virginia Department of Mines, Minerals and Energy to research a wind-energy lease area off the state coast. That same month, the regulator determined that was nothing in the way of an offshore wind project planned by the North American division of Norwegian energy major Statoil. Their plan would cover about 22 miles offshore Maine and generate 12 MW from a pilot program for four floating offshore wind turbines.

The production tax credit salvaged by U.S. lawmakers means wind energy would be competitive with natural gas because of a 2.2 cent credit per kilowatt hour. An investment tax credit gives smaller wind projects a significant break on costs. But utility company Xcel Energy complained the tax credit does little to benefit consumers, saying it may break away from the American Wind Energy Association for how it handled itself during fiscal debates. Nevertheless, state leaders on the U.S. east coast said the tax credit breaths much-needed life into the burgeoning wind energy sector.

Last year, this column noted there was "nothing blowing in the U.S. wind energy sector," at least offshore. But for onshore developments, wind energy in 2012 made up more than 40 percent of the new electrical generating capacity in the United States, compared with 30 percent for conventional resources. The cost for wind energy, meanwhile, is down more than 20 percent since 2008. Though it may be 2014 before new wind energy comes on stream, the AWEA said the tax credit "will allow continued growth of the energy source that installed the most new electrical generating capacity in America last year."

By. Daniel J. Graeber of Oilprice.com