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Better Late Than Never: PTC Extension to Result in Fewer Windfarms Developed in 2013, an Industrial Info News Alert

SUGAR LAND, TX -- (Marketwire) -- 01/04/13 -- Researched by Industrial Info Resources (Sugar Land, Texas) -- The U.S. Congress agreed to extend the federal Production Tax Credit (PTC) for wind power owners for a year as part of its 11th-hour negotiations to avert falling off the so-called "fiscal cliff."

Less than 24 hours after the measure won overwhelming support in the U.S. Senate, the House of Representatives approved the bill by a bipartisan vote of 257-167. Eighty-five Republicans joined 172 Democrats in voting to support the measure, which President Barack Obama was scheduled to sign Tuesday. Voting against the bill were 151 Republicans and 16 Democrats.

With the PTC extension in place, Industrial Info predicts that only 3,000 to 4,000 megawatts (MW) of new wind power could reach commercial startup by the end of 2013, said Shane Mullins, Industrial Info's vice president of product development for the Power Industry. Last year, as much as 12,000 MW of new wind generation came online, beating the amount of new gas-fired generation, he noted. Further, Mullins estimates that between 8,000 and 8,800 MW of new wind generation could reach the construction stage in 2013, with construction and operations extending into 2014.

"Following the boom in wind power commercial startups in 2012, it is now likely that the U.S. wind industry has the necessary federal support needed to keep project development alive in 2013," Mullins said in an interview. "The new PTC extension includes all projects that start construction in 2013 and reach commercial startup in 2014, an important departure from previous PTC extensions, which were based on a commercial startup deadline."

Mullins continued: "An extended PTC puts the onus on wind power developers to quickly revisit and reactivate the project pipeline, which has been on hold for a while as companies focused on completing projects by year-end 2012. Projects that could not be completed by year-end 2012 were placed on hold. Now, those projects need to be revived and reviewed for viability."

The New Year brings new challenges to the windpower industry. "Once again, project developers will be scrambling to meet a new deadline," Mullins said. "Many factors are likely to prevent a repeat of last year's record level of project development. For one, many utilities are ahead of the curve on meeting their state Renewable Portfolio Standards, which mandate a certain percentage of electricity come from renewable sources by a specific year. In addition, many bankable projects that were being developed for a 2013 kickoff were moved into 2012, to take advantage of the PTC."

Another challenge: many developers and equipment manufacturers slashed staff and placed projects on hold, owing to the uncertainty in 2012 about any extension of the PTC. "Developers and manufacturers need time to gear up, so the new PTC extension will be largely felt in the second half of 2013 and will not repeat what happened in 2012, when new development dropped sharply in favor of finishing projects that could operate commercially by December 31, 2012."

In retrospect, Mullins said, 2012 will go down as a year of record U.S. wind power development, based on the amount of projects completed and the number of megawatts that were brought into commercial operation.

The one-year extension of the PTC was part of a package of tax extension measures. The extension will cover all wind projects that begin construction in 2013. Wind power owners will receive a tax credit of 2.2 cents per kilowatt-hour of electricity generated from new windfarms for a 10-year period that starts when the unit achieves commercial operation.

According to the U.S. Energy Information Administration (EIA) (Washington, D.C.), new wind generation accounted for 44% of all new electrical generating capacity in the U.S. in 2012. Natural gas accounted for about 30% of all new generation, the EIA said.

Industrial Info provides an online database for the Global Renewable Energy Market. Coverage includes wind energy, geothermal, hydroelectric, landfill gas-to-energy and utility-scale solar power plants, with detailed information on the companies that own and operate plants, key management contacts, and plant and unit profiles, along with reported activities related to unit outages and major capital and maintenance projects. In North America, Industrial Info is currently tracking more than 400 wind energy projects valued at $125 billion scheduled for construction start in 2013 and 2014. For more information, contact Industrial Info at 1-800-762-3361 or click here.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. To contact an office in your area, visit the "Contact Us" page.

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Joe Govreau

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