Wind industry: Tax breaks key 

Maine’s six major wind-energy projects are generating power at about a quarter of their capacity – a performance level that illustrates why wind-power developers are pushing Congress to extend the tax breaks that are critical to the industry’s survival.

While that power output may seem low, it reflects regional wind conditions and technology limitations. The U.S. Department of Energy found that wind farms in New England operated at an average capacity of 28 percent in 2011, the second-lowest in the country behind the East. By comparison, the highest capacity factors are in the wind-swept Midwest, averaging 37 percent.

Capacity factor is a measure of how much electricity a turbine actually produces during a period, compared to its maximum design if the wind blew all the time. The 25 percent generation level for Maine occurred over the 12-month period ending in September, government figures show.

The sporadic nature of wind generation is a key reason the industry is pushing hard for Congress to extend a tax break that wind-farm owners receive on the amount of electricity they generate. Called the Production Tax Credit, it currently is valued at 2.2 cents per kilowatt hour.

That would translate into a total tax credit of $17.5 million over the last year for the six Maine projects, which reported a combined power generation of about 796,000 megawatt hours.

The credit was first enacted in 1992 and has been extended several times. It will expire at year’s end if Congress doesn’t take action. The industry says thousands of manufacturing, construction and development jobs hang in the balance.

The tax credit won’t be needed forever, the industry says. This month the American Wind Energy Association sent a letter to Congressional leaders with a plan to phase out the credit over six years. That period, the letter says, would let wind energy establish a stable domestic market and make further technology innovations.

Separately, the industry notes that capacity factors have been gradually increasing over the years, as taller towers, longer blades and better turbines extract more power from the wind.

“These improvements require long-term technology investment, and the only way you get that is through certainty and stability in the market,” said Elizabeth Salerno, director of industry data and analysis at the association. “We need a longer lead time to finish the job.”

Maine leads New England in land-based wind energy, with roughly 400 megawatts of capacity online. That’s enough to power 100,000 homes, the industry says. Building these projects has led to nearly $1 billion in investment, according to the Maine Wind Industry Initiative trade group.

But wind-power opponents say the benefits are outweighed by the sight of massive turbine towers and spinning blades on Maine’s mountains, and by the sounds endured by people living next to the projects. They say taxpayers shouldn’t continue to subsidize the technology, through tax credits and government policies that give wind an above-market rate for generating renewable power.

“These things don’t perform,” said Brad Blake, a spokesman for the Citizens’ Task Force on Wind Power. “The question is, why do we have such a poor public policy that panders to a special-interest group that can’t make it on its own and can’t compete economically?”

Blake has been calling attention to Maine’s performance data, which comes from reports that operators file with the Federal Energy Regulatory Commission. The 12-month figures were compiled for the Portland Press Herald by a financial analyst. The accuracy was confirmed by Boston-based First Wind, which owns four of the projects, and a former owner of the Record Hill wind farm, near Rumford. TransCanada Corp. didn’t reply to questions about its Kibby Mountain project in western Maine.

The information shows that performance varied greatly by site and season. As a rule, Maine’s wind farms generate the most power during the winter, less in the spring and fall, and the least in the summer. First Wind’s project at Mars Hill in Aroostook County tallied a top capacity factor of 44 percent during the winter. On the other end of the scale, the Kibby Mountain project had a capacity factor of 14 percent during the summer months.

But other factors can drag down the numbers, operators say.

For instance, Record Hill’s capacity factor in the fall of 2011 was less than 6 percent because the project had just started up midseason. That reduced the first-year, annual capacity factor to less than 20 percent. Rob Gardiner, a former owner and developer of the project, said he expects robust generation this winter to boost the annual capacity factor to 34 percent.

First Wind’s projects in eastern Maine – Stetson 1, Stetson 2 and Rollins – averaged roughly 23 percent over the 12-month period. They could have approached 30 percent, according to John Lamontagne, a First Wind spokesman, but the company was asked to curtail generation during construction of a new transmission line.

Both Gardiner and Lamontagne say technology changes and improved designs will bring up the annual capacity factors of Maine’s wind fleet.

Gardiner noted that Record Hill has larger, more-efficient turbines that are proving to be very reliable. Wind power’s high output in the winter is a good match for New England’s energy demand, he noted.

First Wind recently brought a new project online, near Ellsworth. The Bull Hill wind farm is located on low ridges, but it features 310-foot-tall towers that catch more wind and increase capacity, Lamontagne said.

Gardiner also cautioned that wind capacity factors should be put in context with other forms of generation. For example: The nation’s hydro-electric dams averaged 40 percent in 2009, according to the U.S. Department of Energy.

Power plants that are needed to supply basic around-the-clock energy stay on for longer periods. Agency data show nuclear reactors averaged 90 percent, and coal-fired plants averaged 64 percent. Plants that run on natural gas averaged 50 percent, during hours of peak demand.

Natural gas generates half the electricity in New England. That makes the price of natural gas critical to what Mainers pay for electricity.

Wholesale electricity prices this fall have been in the $35 per megawatt-hour range, which is very low. By comparison, Maine’s six leading wind farms produced power over the 12 months ending in September at an average of $38.07 per megawatt-hour, FERC data show.

As 2012 comes to a close, the outlook for the production tax credit is uncertain. On three occasions, Congress allowed the credit to expire at year’s end, then restored it when lawmakers reconvened.

Beyond the tax credit, the wind industry is counting on fossil fuel prices – notably natural gas – to start rising again. Because wind has no fuel costs, it can offer stable rates over 20 or more years, Salerno, at the wind energy association, noted.

“The ultimate factor that matters is price per kilowatt hour,” she said.