Fiscal Cliff Approval Not a Slam-Dunk Win for Wind Power Equipment Manufacturers

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Researched by Industrial Info Resources (Sugar Land, Texas)--The extension of the federal wind power tax credit (PTC) as part of the fiscal cliff package was, for the most part, taken as a victory by the wind power equipment manufacturing sector. But because it was approved in the later part of the year, it was too late for many employers and layoffs were not prevented. The pending expiration of the credit already had wreaked havoc on wind development in manufacturing plants for turbine parts, wind towers, turbine blades and nacelles across the country.

Companies have laid off thousands of workers in recent months, and developers put new projects on hold, threatening another 37,000 jobs, according to the American Wind Energy Association. As approved by Congress on Tuesday, the extended credit will apply to projects that began in 2013, but are not operational until 2014.

Many employers, who were afraid that the PTC would not pass, were forced to lay off a significant number of employees. Now these employers, such as Gamesa (MCE:GAM) (Zamudio, Spain), are concerned that many members of its trained workforce may not be available later this year, when new orders are expected to pick up. As with anything in business, it takes time, and the same can be said about the PTC effects on the wind manufacturing sector. With the extension approved, many hope that the orders for turbines, turbine blades, wind towers and nacelles will increase over time, but there's always the possibility that they will be going through the same process at the end of 2013.

According to the Congressional Budget Office, extensions of energy tax benefits to wind power developers and wind power equipment manufacturers will cost more than $10.3 billion over five years and more than $18.1 billion over 10 years. The Joint Committee on Taxation reported that a one-year extension of the wind PTC alone would cost $12.1 billion.

The question still facing developers is whether the one-year extension will be enough to recapture the industry's lost momentum. Given the thousands of jobs that were lost during the last year, it is a daunting task for the wind power equipment manufacturers to replace not only those workers, but also the orders that were cancelled or placed on hold. The recovery of the wind power equipment manufacturers will rely heavily on how rapidly the wind power developers get their windfarm projects back on track.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.