Siemens Urges Longer-Term US Energy Plan

By Anna Fifield

The head of Siemens USA has called for a longer-term strategy to encourage the development of wind power in the US, saying that Congress’s short-sighted approach is squeezing investment in alternative energies.

The wind industry would even accept less generous tax credits if they lasted for longer, said Eric Spiegel, chief executive of the US unit of Siemens, the German company that is the world’s third-biggest wind turbine manufacturer.

“Let’s get a policy in place that . . . goes on for five or six years, because this kind of starting and stopping really hinders the market,” Mr Spiegel told the Financial Times.

As part of the fiscal cliff deal at the end of last year, Congress agreed to extend the production tax credit (PTC) for investment in wind power, which was due to expire on December 31, by one year.

It also changed the eligibility for the credit from starting supplying power to the grid to starting construction, meaning that companies can benefit from the beginning, not the end of projects.

Last year was a record for turbine installations as wind farms raced to meet the requirement to be operational before the end of 2012 to qualify for the credit.

The American Wind Energy Association, the industry group, reported that wind energy providers secured $25bn in private investment and installed a record 13,124 megawatts of electricity generating capacity in 2012.

But the uncertainty over the future of the PTC sent chills through the industry, causing a sharp slowdown in new projects and orders for equipment. Siemens laid off 615 workers at plants in Iowa, Kansas and Florida in September as the PTC hung in the balance, although it has this year started hiring back a small proportion of them.

“The production tax credit has now been passed but, frankly, now it’s going to take a while to ramp back up,” Mr Spiegel said. “People are ramping up and ramping down – it’s very difficult on business.”

Siemens would like to see a five or six-year timeframe for the credit, even if it meant “stepping down in terms of the amount of the tax credit”, he said in an interview.

Mr Spiegel said that although the cost of producing electricity through wind power had fallen by about 40 per cent over the past five years, the sector was facing strong competition from gas, where prices have plummeted.

An increase in North American gas production due to the shale gas book has driven the US benchmark price down to about $3.40 per million British thermal units.

“If you look out over the next five or six years, I don’t think you’re going to see gas prices remain at these low levels . . . The number of wells drilling for gas is down considerably over the last year because these, the oil and gas companies can’t afford to drill for this at $3 or $3.50,” Mr Spiegel said. Siemens also makes turbines for gas plants and has benefited from the shale boom.

“But if you get back up at $4 or $5 . . . At those kinds of prices I think you’re going to see a lot more wind be economic, because we already have some wind projects that are already competitive with gas,” he said.

President Barack Obama was a strong supporter of alternative energy development, especially wind and solar power, but the shale boom has forced him to embrace oil and gas as well, promoting an “all of the above” energy policy.

In his State of the Union address this month, Mr Obama lauded the “tens of thousands of good, American jobs” that had been created through the development of the renewable energy industry

“Four years ago, other countries dominated the clean energy market and the jobs that came with it,” the president said, even as he noted that the US now produces the most domestic oil in 15 years. “We’ve begun to change that. Last year, wind energy added nearly half of all new power capacity in America. So let’s generate even more. Solar energy gets cheaper by the year – so let’s drive costs down even further.”

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