Windfall Profits Posted As PTC Sunset Nears
Posted on: Saturday, 10 May 2008, 03:00 CDT
By Blankinship, Steve
Although almost certain to be extended, the production tax credit (PTC) for wind generation (which allows power producers to deduct two cents for each kWh produced from wind) is scheduled to expire at the end of this year. That potential expiration is driving profits for many wind turbine manufacturers, as developers rush to build as much new wind capacity as they can. Last year, U.S. power providers added more than 5,200 MW of new wind capacity. And the American Wind Energy Association projects that additions this year could equal that amount as power providers rush to finish wind farms before the credit expires.
GE Wind, one of the largest maker of wind turbines in the U.S., and Vestas, among the largest makers of wind turbines in the world, report record orders as rising natural gas prices and state greenhouse-emission laws drive unprecedented demand for wind power. Wind now accounts for 30 percent of new generating capacity and may boost GE's wind-turbine sales 25 percent to $6 billion this year. Xcel Energy, the biggest provider of wind power in the U.S., is buying 67 GE turbines for one of its projects in Minnesota.
Vestas has opened its first U.S. manufacturing plant, in Colorado, and Siemens opened a plant in Iowa last fall. Meanwhile, GE is partnering with two companies to expand turbine blade production in New York and Iowa.
Early this year, GE Vice Chairman John Rice told an investor conference that GE Wind's profit margin will eventually be about $1 billion. If it reaches that level this year with sales of $6 billion, the profit margin would be 17 percent, news reports estimated. "Customers are giving billions of dollars of orders already because they're afraid they're going to lose their spot in line," said John Krenicki, who heads GE Energy.
GE bought into the wind generation business in 2002 when it acquired Enron's wind turbine manufacturing assets for less than $300 million. Since 2004, GE Wind's production has grown 600 percent and sales have quadrupled. It now claims 45 percent of the U.S. market. Since late February, the GE Energy wind business unit has announced $1.7 billion in orders, including its second billiondollar contract since November with Invenergy Wind.-Steve Blankinship
Copyright PennWell Publishing Company Apr 2008
(c) 2008 Power Engineering. Provided by ProQuest Information and Learning. All rights Reserved.
Source: Power Engineering
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