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The 3 biggest threats to the U.S. wind industry

The 3 biggest threats to the U.S. wind industry

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The U.S. wind power market -- one of the fastest-growing in the world -- could see its expansion derailed by three factors, including an expiring tax credit that used to enjoy bipartisan support.

The U.S. wind power market -- one of the fastest-growing in the world in 2011 -- could see its expansion derailed by the expiration of key federal tax incentives coupled with continued low natural gas prices and modest electricity demand growth, the U.S. Energy Department said in its annual assessment of the industry.

The Energy Department's sixth annual Wind Technologies Market Report, which was released today, showed 32 percent of newly installed power-generating capacity in 2011 came from wind, amounting to $14 billion of investment. About 6,800 megawatts of new wind power capacity was added in 2011 to the U.S. grid, a 31 percent increase from the previous year.  The nation's wind power capacity, which reached 47,000 MW at the end of last year, has since grown to 50,000 MW. Check out the DOE's interactive wind energy map to dig into the details.

The growth in capacity has, in turn, bolstered domestic manufacturing with nearly 70 percent of all equipment installed at U.S. wind farms being made in America.

All of this good news is being used by the Obama Administration during the president's three-day bus tour through Iowa (the country's No. 2 win power production state) to drive home the central point: ending the wind production tax credit, which pays wind producers 2.2 cents per kilowatt-hour could dramatically slow new wind installations in 2013.

Little can be done politically about the other two primary threats -- natural gas prices and electricity demand. The production tax credit, or PTC, is another story.

The PTC has enjoyed bipartisan support in the past. The PTC was passed during the administration of President George H.W. Bush. The PTC faces a tougher, more critical crowd in the Republican-led House of Representatives, where support runs thin for government-backed renewable energy projects.

Other key takeaways in the report:

  • While wind installations were 31 percent higher than in 2010, they were still well below the levels seen in 2008 and 2009.
  • The U.S. remained the second-largest market (behind China)  in annual and cumulative wind power capacity additions, but was well behind the market leaders in wind energy penetration. For example, the cumulative winbd power capacity installed at the end of 2011 is estimated to equal roughly 3.3 percent of U.S. electricity demand. Wind supplies the equivalent of 29 percent of Denmark's electricity demand, 19 percent of Portugal's, 19 percent of Spain's, 18 percent of Ireland's and 11 percent of Germany's.

Photo: GE

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Kirsten Korosec

Contributing Editor

Kirsten Korosec has written for Technology Review, Marketing News, The Hill, BNET and Bloomberg News. She holds a degree from Northwestern University's Medill School of Journalism. She is based in Tucson, Arizona. Follow her on Twitter. Disclosure