TAX CREDIT EXTENSION PUTS WIND INDUSTRY BACK TO WORK;
2005 EXPECTED TO BREAK CAPACITY INSTALLATION RECORDS

New wave of projects brings clean energy, investment,
jobs to rural America

With the extension of the federal wind energy production tax credit in September, capacity installations in 2005 look likely to beat all previous records, the American Wind Energy Association (AWEA) said today in its quarterly U.S. market outlook. The previous high for new wind power capacity installations in one year was 1,696 megawatts (MW) in 2001. Most industry participants agree that 2005 will be a better year, with some predicting installations to exceed 2,500 MW.

"Conditions are right for next year to be a record-breaking year," said AWEA Executive Director Randall Swisher. "We will see what the U.S. industry can do at a full-speed run for the next fourteen months. As natural gas prices continue to demonstrate volatility, and coal prices are increasing as well, wind power looks more attractive as a way to diversify a utility's supply portfolio."

The slow-down in installations in 2004 that resulted from the expiration of the production tax credit (PTC) means that many projects that have been in the development pipeline are now ready to move forward quickly. Wind power project developers and wind turbine and component manufacturers are now racing to lock up supply contracts for the coming year.

At the same time, rising and volatile natural gas prices make wind energy attractive in terms of the long-term stable energy price that the technology can offer. Once a plant is built, it requires no fuel and produces no harmful emissions. According to the Energy Information Administration, in the best wind resource areas such as the plains states and the upper Midwest, wind energy is the lowest-cost new electricity resource (with the PTC in place) when natural gas prices rise above about $3.50 per thousand cubic feet. On the New York Mercantile Exchange, natural gas prices topped $7 per thousand cubic feet in October, and most experts expect it to continue in the range of $5 for the foreseeable future.

The more wind energy capacity is installed, the more it will help to reduce the current natural gas supply shortage in the U.S., according to AWEA. The increasing use of natural gas to power electric generating plants is preventing the nation from building up its storage levels during the summer. But in many areas of the country where wind farms
are generating electricity, they are directly helping to conserve vital natural gas supplies.

"We estimate that the wind farms already in place, and those that will be installed by the end of 2005, will be saving over 0.5 billion cubic feet (Bcf) of natural gas per day in 2006," said Swisher. "Using conservative growth estimates of 3,000 MW installed every two years for the next four years, the U.S. could top 15,000 MW of installed wind
power capacity by the end of 2009, which would save nearly 0.9 Bcf/day by the end of this decade."

Estimated Natural Gas Saved by Wind Generation

Assumptions for graph:
30% capacity factor for new wind installations
Approximately 10 cubic feet of natural gas required to generate 1 kWh of electricity
80% of wind generation replaces natural gas-fired electricity

Because the tax credit was extended relatively late in the year, AWEA expects the U.S. to install approximately 480 MW of new capacity in 2004, well above its previous estimate of 350 MW but far below previous strong years such as 2001 (1,696 MW) and 2003 (1,687 MW). The full list of expected installations throughout the year is provided below.

If installed wind power capacity were to consistently expand at a rate of 18% per year, AWEA said, six percent of the nation's electricity could be generated by wind power by the year 2020, resulting in over $100 billion of investment, in addition to saving millions of cubic feet of natural gas. AWEA is continuing to pursue policies - such as a long-term PTC extension and federal and state renewables portfolio standards (RPS) - that will move the wind industry beyond the boom-and-bust cycles that have resulted from short-term PTC extensions in the past. 

Wind Energy Projects To Be Completed in 2004

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AWEA, formed in 1974, is the national trade association of the U.S. wind energy industry. The association’s membership includes turbine manufacturers, wind project developers, utilities, academicians, and interested individuals. More information on wind energy is available at the AWEA web site: www.awea.org

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