Windmill Fields Draw Opposition : Energy Farmers Struggling for Success
Wind farming, a risky business nearly blown away by changes in federal tax codes and declining energy prices, is struggling to turn about.
“The industry is in its adolescence. Most adolescents have pimples and are awkward,” said Jerry Yudelson of Zond Systems Inc., a Tehachapi, Calif., wind-power company.
“Then they grow up into something beautiful. With wind, the question is when, not if.”
Wind farms, stretches of remote land filled with hundreds of odd-shaped, electricity-producing windmills, had been touted as a source of both alternative energy and high returns for investors.
But that changed at the beginning of this year with the expiration of the 15% federal tax credit for renewable energy investments. A similar 15% California tax credit is set to expire at the end of this year.
Need for Capital
With the elimination of investment tax credits, many wind farmers are turning toward more demanding institutional investors for capital, said Richard Lyons, an attorney with the San Francisco law firm of Neisar & Wickersham.
“Institutional investors are looking for a fixed after-tax rate of return and they are looking at you to bear part of the risk that individual investors had assumed,” he said.
Wind lobbyists are seeking a two-year extension of the tax credit, which is included in the tax reform plan approved by the Senate Finance Committee last month.
The loss of these incentives has taken some of the wind from wind farmers’ sails. But sales have not been taken entirely out of the wind industry.
Industry officials estimate that wind farms will bring in more than $100 million in revenue from the sale of electricity this year.
Most in California
California accounts for 95% of the nation’s wind-powered electric generating capacity and 80% of the world’s capacity. The 13,300 wind-generated turbines throughout California last year produced more than three times the capacity of the previous year.
The state’s most prominent wind farm are located along the rolling hills of Altamont Pass southeast of San Francisco; Tehachapi Pass, 90 miles northeast of Los Angeles, and San Gorgonio Pass, a stretch of wind-swept desert leading into Palm Springs.
Because of aesthetic concerns--the farms can look like a spindly metallic forest--many communities have balked at their construction. The permit process often bogs down, said Eliza Dixon of Renewable Energy Ventures Inc.
The Palm Springs company developed a wind farm in the San Gorgonio Pass that has been delayed repeatedly by county officials and nearby residents.
Too Visible
“We have a problem with the visibility of some of these machines. It’s quite open in the desert and things stand out. Looking through them can be very hard on the eyes,” said Jeffrey Weinstein, who oversaw the development of wind farms in San Gorgonio Pass for the Riverside County Planning Department.
Michael Bergey, president of the American Wind Energy Assn., an Alexandria, Va.-based trade group, agrees that the wind industry is weathering a heavy storm.
His company, Bergey Windpower Co. of Norman, Okla., recently was forced to reduce its work force and curtail expansion plans.
Bergey said his company, which manufactures a $15,000 windmill for residential use, was saved by a sharp increase in foreign sales, which now account for 60% of his overall sales.
“The energy business is known for being cyclical and we’re in the bottom of the cycle now,” Bergey said. “The market is driven a lot by concern over energy costs. With prices stabilizing, people are not as willing to invest in energy-saving devices.”
