Turbine plans hit headwinds

After a banner year in the U.S. wind power industry, 2009 is whipping up a foul breeze for the nation's Next Big Thing, as the recession and credit crisis continue to buffet renewable energy plans.

It's not clear whether the slowdown will hurt Minnesota's No. 4 ranking in wind energy production. Many wind projects already underway in the state still have the green light. But signs of the chill abound, affecting players up and down the clean-tech supply chain.

•The Finnish company Moventas is postponing (though hasn't canceled) plans to build a 75,000-square-foot assembly plant in Faribault, Minn., to make wind-turbine gearboxes.

•Wind tower maker DMI Industries, part of Thief River Falls, Minn.-based Otter Tail Corp., recently cut 100 more jobs from its West Fargo, N.D., plant to adjust to declining demand, bringing layoffs to 160 so far this year.

•Big commercial wind developers have essentially stopped acquiring land for new projects, reports energy consultant Westwood Professional Services in Eden Prairie.

Investments in large-scale renewable energy projects started drying up last fall when big investment banks began crashing, because they typically had footed a good portion of the bills for the projects by buying tax credits from the energy developers to offset their own bills. Lehman Brothers, which no longer exists, was a key player. The pool of such "tax equity investors" has shrunk from around 20 to about a half dozen, industry sources say.

That's not good for a capital intensive industry such as wind. Buying and erecting a commercial-scale turbine costs $2 million to $3 million, said Lisa Daniels, executive director of Windustry, a Minneapolis nonprofit that works to develop wind energy in rural communities.

Short-term dip

It's not all bad news, though. Community-based developers are finding turbines easier to come by now that competition for them from larger players has slowed, said Windustry's Daniels. And no one expects long-term demand for renewable energy to die.

"This blip in 2009 is really very minor compared to the massive growth in wind project installations that we project will happen," said Kaplan, who forecasts a rebound in 2010.

Rick Packer, a Twin Cities area residential developer now doing wind project land deals for Westwood Professionals, also sees the current capital crunch as shortlived.

"This is -- at most -- a 12-month thing," Packer said.

Then there's the widely anticipated jolt expected from President Obama's stimulus package, which devotes about $80 billion in spending, loan guarantees and tax credits for renewable energy. Details of exactly how the new programs will work are still being hammered out. Among other things, the package extends a production tax credit for three years.

One of the provisions, a cash grant option that can be used in place of a production tax credit, will be a boon, say industry players.

"We are seeing developers say it's very attractive to them and could help them with the troubles they've been facing on the financing front," said EER's Kaplan. "It's a very bright light, I would say."