Amid Economic Crisis, Wind Power Spins More Slowly

As recently as this summer, the cost of power from new wind farm was 8.4 cents per kilowatt hour, cheaper than power from a new gas-fired power plant (9 cents) or a new nuclear plant (9.8 cents). Only coal, at about 6 cents for kilowatt hour, was cheaper, according to Emerging Energy Research, a Cambridge, Mass.-based market research firm.

But prospects for banner growth in 2009 have ebbed. Falling prices for natural gas, transmission bottlenecks, and other costs have undermined wind power. Rising steel costs alone have pushed up the price of building one megawatt of wind power about 30 percent.

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"You've got fuel costs declining, so the competitive advantage for wind over regular generation is narrowing," says Jamieson Bender, an associate partner with Ducker Worldwide, a Troy, Mich.-based market research firm. "That means the payback [from wind] isn't quick enough for some utilities."

This year saw 262 wind projects announced while 66 projects were canceled or postponed -- on a par with 2006, according to Ventyx, an Atlanta-based energy consulting company. New projects are likely to dip and cancellations rise in 2009, Bender and others say.

The critical short-term challenge facing wind power developers is financing. But with Wall Street plunging, the tax credit associated with wind power has lost some of its allure. Wind farms were financed symbiotically with investors who used the wind-production tax credits of 2.1 cents per kilowatt hour to offset profits elsewhere. The need to offset profits has dipped worldwide.

Until this fall, more than a dozen large investment groups actively financed wind power development. Only about half remain active, says Ethan Zindler, head of North American research for New Energy Finance, a London-based market research firm.

Lehman Brothers, one of five top wind-power lenders on Wall Street, is no more. Wachovia and AIG, have been sold and sidelined, respectively. JP Morgan and GE Energy Financial are question marks, Zindler says.