Plans to build a $40 million plant that would produce towers for wind turbines have been delayed, and industry observers say uncertainty over federal subsidies for renewable energy may be a factor.
“Industrywide we are seeing a slowdown in orders for towers and turbines after 2012 that is rippling down the supply chain and the big issue is the lack of certainty around the production tax credit that gives a favorable low tax rate to renewable energy,” Peter Kelley, spokesman for the American Wind Energy Association, said Friday.
But others argue the free market should determine the industry’s economic fate, not subsidies funded at taxpayers’ expense.
“The fact that they need a targeted tax credit to survive suggests to me that maybe it’s not an economically viable industry in the first place,” Nick Loris, policy analyst with the Heritage Foundation. “I’m all for more renewable energy entering into the marketplace so long as it can be done without preferential treatment from the government.”
When the joint venture by Worthington Energy Group and Gestamp Renewables to build the Cheyenne plant was announced last February, officials said plans were to start building the plant this year, hire about 150 workers and begin producing up to 300 towers per year by early 2012.
However, only some dirt work at the site has been done so far.
Cathy Lyttle, spokeswoman for Worthington Industries Inc., a metal processing company based in Columbus, Ohio, declined to comment, citing company policy against speaking about ongoing projects or their status.
Randy Bruns, head of the Cheyenne and Laramie County economic development organization, said he understands that the project is at least on hold through the winter.
“They still have it queued up for spring,” Bruns said.
Bob Jensen, CEO of the Wyoming Business Council, said there has been no indication that the project has been suspended but Worthington has not communicated any set date for starting construction.
Bruns said he suspects that the company ran into delays that made it impractical to begin construction in the winter.
“It starts adding substantially to their costs to be under construction all winter,” he said.
In addition, Bruns speculated that uncertainty over whether federal tax credits for wind energy production will continue past 2012 may be an issue. Wind developers may put off building new wind farms because of the uncertainty, which means orders for new wind turbines will be hurt, he said.
“A lot of these projects, the economics change without that tax credit,” he said.
The American Wind Energy Association, which is based in Washington, D.C., represents some 2,500 wind turbine manufactures, wind developers and others.
Kelley said that while he’s not privy to what is holding up the Cheyenne plant the uncertainty over the tax credit is already costing current plants business and jobs.
“What has been a bright spot through the depths of the recession, a real success story for U.S. manufacturing jobs, is now at risk,” he said.
According to the U.S. Treasury Department, the tax credits cost about $1.5 billion a year.
Loris, of the Heritage Foundation, said that the money for targeted tax credits would be better spent on lower taxes across the economy.
“I don’t think that subsidies and targeted tax credits really create jobs,” he said. “I think it shifts jobs from one industry to another.”