Wind Power Tax Credit Renewed

Wind Companies Gain


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The wind production tax credits, set to expire at the end of 2012, have been renewed as part of the late-stage fiscal deal.

Accordingly, wind companies like Denmark-based Vestas Wind Systems A/S (CPH: VWS), Gamesa (MCE: GAM), and Nordex SE (ETR: NDX1) saw their shares shoot up.

The Production Tax Credit pays wind-farm owners at the rate of 2.2 cents per produced kilowatt-hour.

From Bloomberg:

“It’s really good news for Vestas, because the American market and how it develops is extremely important,” Chief Marketing Officer Morten Albaek said today in a phone interview. “It’s a good way of starting the new year.”

The uncertainty over the extension of this tax credit meant that the wind sector saw a flurry of deals and development projects pushed through late in 2012, as investors and developers tried to make use of what time they had.

The Energy Information Administration had mentioned in mid-December that over the year, more than 12 gigawatts of wind capacity will have been installed—well above 2009’s 10 gigawatts.

Under the deal, the tax credit has been extended through 2013. That means, of course, we’ll have another round of worrying as this year draws to a close. But in the meantime, per the American Wind Energy Association, the extension means at least 37,000 jobs have been safeguarded, and wind installations should continue to increase.

Vestas, for example, had been dialing down its U.S. operations in anticipation of the tax credit expiration. Last year, the company laid off many people, intending to reduce its payroll to 16,000 before the end of this year. That’s quite a downturn from 2011’s 22,721.

Gamesa has two Pennsylvania factories, and the tax extension means it can ramp up its operations.

But the nature of the wind industry is such that farms take between a year to a year and a half just to develop. So don’t expect miracles just yet.

Nordex has an Arkansas plant, opened back in 2010, that produces about 200 megawatts per year. It is hoping to increase that to 750 MW and increase its U.S. workforce beyond the current 200 employees.

One good thing about the deal is that it will allow all development begun in 2013 to continue, whether or not the projects are completed by the end of the year.  


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