US Renewables Business Climate

When the production tax credit (PTC) expired at the end of the 2013, a record number of wind turbines were under construction. At that time, businesses were waiting for a decision from the US Congress on future renewable energy incentives. Strategic planning is very challenging for companies when the business outlook is so short. Renewable energy businesses are in need of long-term governmental incentive plans. Thankfully on April 4, 2014, the Senate Finance Committee approved a package of renewed tax breaks with a two-year PTC extension for wind energy. The bill extends the PTC to projects that start construction before the end of 2015.

The few next years will still be very challenging for the renewable sector. Global oil consumption will continue to grow by around 3% this year, from 90.68 million barrels to 93.61 million barrels per day (Energy Information Administration, Short-Term Energy Outlook, March 2014). We may experience an overproduction of oil-based products in the near future, which will keep prices low. It all depends on if the situation remains calm and stable in the oil production and drilling areas.

In the US, there are high hopes that shale oil will keep oil prices low, even as consumption increases. The Energy Information Administration (EIA) stated in its study, “Liquid Fuels and Natural Gas in the Americas,” that the USA has 25 billion barrels of proven oil reserves, which is about the same amount in estimated reservoir accumulations of undiscovered yet technically recoverable oil resources.

Partially to blame for the challenging times is the uncertainty around the price of oil and other fossil-fuel sources. Plus, the energy discussion always involves politicians, elections, lobbying, and more. From time to time, I feel that the public audience forgets that the fuel from renewable energy sources – like wind, solar and tidal – are really free!

I keep hearing that renewable energy is expensive and will continue to need governmental incentives to be profitable. Is it really expensive? Not really – electric utilities across the country are noting the affordability of wind energy:

“Wind prices are extremely competitive right now, offering lower costs than other possible resources, like natural gas plants. These projects offer a great hedge against rising and often volatile fuel prices.” – David Sparby, President & CEO of Xcel Energy’s Northern States Power, announcing 600 MW of new wind power contracts on July 16, 2013. Source: www.awea.org

The EIA, the statistical arm of the Department of Energy, has found wind energy to be one of the most affordable options for new electricity generation, alongside new natural gas units.

At the moment, companies supplying systems and components are busy continuing the construction of wind turbines and solar plants that were under construction before the end of 2013. Still, the renewable energy systems sales climate is simply too placid; buyers and plant owners are waiting for legislators’ energy decisions. Companies are delaying the start of projects to be sure that they are eligible for possible extended or new incentives. This is not good for businesses, as it creates a cycle of high workloads and then no work at all. Is this good for the employees or employers? Definitely not. For every business, a stable climate is much better over the long run than periodic cycles of highs and lows caused by legislators.

A good combination of various energy sources sounds right to me, as then we will have a more stable and sustainable energy portfolio with reasonable costs for future generations.

Risto Ahvo
General Manager