The issue of extended tax breaks for wind power is taking a serious turn, and it isn’t looking pretty. This week, Vestas Wind Systems A/S (CPH: VWS), the world’s largest wind turbine manufacturer, is expected to announce almost 1,600 job cuts, mostly in Colorado.
Chief Executive Officer Ditlev Engel said in January that U.S. jobs would be scrapped “for sure” unless Congress extends the production tax credit, or PTC, which expires at the end of 2012. He may provide more details Wednesday when the Aarhus, Denmark-based company reports earnings for the first half of 2012. Gamesa Corp. (GAM) Tecnologica SA and other manufacturers in the industry also have announced layoffs.
Over in Congress, the President’s attempts to extend these credits are being systematically blocked by some members of Congress. Their claim usually is that emergent renewable industries don’t need government support, and they are in favor of ending all energy credits.
Meanwhile, the American Wind Energy Association has stated that a non-renewal could lead to the loss of almost 37,000 jobs.
What makes the technology profitable at this early stage is a 2.2 cents per kilowatt-hour incentive. The wind sector employs roughly 75,000 people across the country. Should this incentive disappear, turbine orders are expected to drop by almost 56 percent in 2013.
So Vestas and other manufacturers are racing against deadlines as developers seek to rush projects to completion before the credits deadline, in case it is not renewed.
Vestas has a major U.S. presence; it has over 3,000 U.S. employees, a sales unit in Oregon, development centers in Texas and Massachusetts, and has invested over $1 billion in four Colorado factories.
Back in 2003, Congress had allowed the credits to expire. In 2004, yearly wind installations dropped to a mere 397 megawatts, compared to 2003’s 1,670 megawatts. That should be something of an eye-opener, but we can only hope.