Siemens Layoffs Portend U.S. Wind Slowdown

Will the U.S. wind industry hit the brakes when a tax credit expires at the end of this year? At this point, it appears that it will, although policy uncertainly isn’t the only cause.

Siemens Energy yesterday said it is laying off 615 employees at its U.S. wind operations, or 37 percent of its staff, according to reports. The cuts will come in facilities in Kansas and Iowa where wind turbine nacelles and blades are made and at its Orlando, Florida headquarters.

“Uncertainty surrounding the future of the production tax credit for new wind turbine installations, the current trend toward more natural-gas-based power generation due to record-low natural-gas prices and still lingering recession impacts on energy-demand growth are casting a shadow on the short-term future of the entire U.S. wind power industry,” Siemens Energy said in a statement given to employees Tuesday morning and published in North American Windpower.

Other global wind manufacturers in the U.S., including those at Vestas and Clipper Windpower have also shed jobs in the U.S., citing policy uncertainty and softening demand. (See, Vestas Speeds Layoffs in Face of Uncertain Wind Outlook.)

The moves bring into focus a production tax credit put in place in 1992 to encourage development of wind energy which is set to expire this year. It gives wind project developers a 2.2 cents tax credit for every kilowatt-hour of wind energy produced.

The wind tax credit has become a point of debate in the presidential race—Obama supports extending it while Romney would let it expire—and among lawmakers. Yesterday, wind foes senator Lamar Alexander (R-Tenn.) and Congressman Mike Pompeo (R-Kansas) penned an opinion in the Wall Street Journal saying that wind power is mature and does not deserve to be subsidized any longer.

Also yesterday, a diverse group of businesses outside the wind industry sent a letter to Congress urging lawmakers to extend the wind tax credit. Electricity prices fall as wind energy enters the market and purchasing wind energy allows businesses to hedge against the volatility of fossil fuel-based power generation, the businesses said in their letter.

An Associated Press article in the Des Moines Register earlier this week noted it’s unlikely that lawmakers will act before the presidential election to extend the tax credit which some Republicans, including Iowa Senator Chuck and governor Terry Grassley Brandstad support. About 20 percent of Iowa’s energy is generated by wind and the state employs about 7,000 workers in the wind industry.

A Navigant Consulting study, done for the American Wind Energy Association, estimates that wind-supported jobs will drop by nearly half from 78,000 this year to 41,000 in 2013 with no extension. If extended for four years, jobs will grow to 95,000 and wind investments will grow to $16.3 billion and 8 to 10 gigawatts of annual installations through 2016.  

Policy uncertainty isn’t the only reason wind’s prospects in the U.S. are faltering. Natural gas prices have plummeted in the past three years, making it cheaper than other sources and the fuel of choice for power generators.