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Investment Climate for Wind Energy

The U.S. wind energy industry brought almost 10,000 megawatts (MW) of new wind power capacity online in 2009, a record high and significantly above industry forecasts. The unexpected 2009 growth was due primarily to the federal government’s initiation of the 30% cash grant, a cash-based incentive based on qualified construction costs. Wind energy developers now have the option to choose the Cash Grant, the Investment Tax Credit (“ITC”) or the Production Tax Credit (“PTC”) in forming their project’s capital. The majority of wind developers are utilizing this new upfront cash-based incentive because it reduces risk while generally providing a better rate of return for investors. Despite its positive impact on wind energy development, the well-received cash grant is set to end in 2011. If allowed to expire, there would be a significant impact on development if other sources of capital, especially tax-motivated investors, do not fill the gap. Nonetheless mandated growth of renewable energy continues. Renewable portfolio standards (“RPS”) or renewable goals are components of many states’ electricity development plans. They require power providers to obtain a minimum percentage of their power from renewable energy resources by a certain date. Currently, 29 states plus the District of Columbia have RPS policies in place. Together these states account for more than half of electricity sales in the United States. Other catalysts for wind energy development suggest attractive investment opportunity:
  • Development costs narrow. Wind energy is becoming more competitive with conventional energy options as fossil fuel prices tend upward and supply sources remain distant, expensive to develop and political risks threaten supply disruption. Simultaneously turbine manufacturing costs continue to fall as research and development investments in wind technology improve operating performance.
  • Environmental improvement: As scientific studies continue to argue, climate change and greenhouse gas emissions remain problematic. Renewable energy is viewed as an integral part of the solution. Coal, oil and even natural gas-based energy generating systems will be burdened with additional costs, possibly including CO2 controls, making renewable energy technologies more competitive.
  • Public awareness: Increased public awareness of economic, environmental and energy security issues have led many consumers and politically active shareholders to push for a “greener environment.” Many businesses have responded with corporate policies that support a cleaner environment. State policy-makers in turn are looking to strengthen renewable portfolio standards to bring diversity and security to their state’s energy supply while boosting local economic development.
  • Local issues: Site selection and permitting for conventional energy generation facilities have become increasingly contentious in some regions, leading to stronger demand for wind energy options that can be more easily sited, permitted and installed. Governments at all levels in the U.S. and abroad recognize increased opportunities for job creation and development of local economies stemming from growth in the wind energy sector.
Opportunities for wind energy development continue to grow. Annual installed capacity is likely to grow, but will be composed of relatively smaller projects that contribute incrementally to total installed capacity. It is important for wind energy developers to rely on an experienced, well-informed renewable energy financial advisor like the Vert Investment Group to select and develop projects that promise appropriate risk-adjusted economic and technical returns.

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