Amid Economic Crisis, Wind Power Spins More Slowly

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On Michigan's 'thumb,' a broad peninsula whose gusts make it one of the best places in the US to site a wind farm, Noble Environmental Power has erected 30 huge wind turbines - 16 more will finish the job.

But the project was hit by a financial gale last month when key underwriter Lehman Brothers went bankrupt. With Lehman out, Noble was forced to sell in a hurry. Three more Lehman-financed wind- power projects in New York are also in doubt, according to published reports.

America's credit crisis is shaking up not only smaller alternative energy sectors like solar and geothermal, but also the largest renewable electricity sector - wind power.

As a result, wind generation may grow far more slowly in the United States next year, experts say. Financing for wind projects is likely to shift more to deep-pocketed utilities and other companies far from Wall Street - including big foreign companies searching for a foothold in the United States.

Until this fall, plowing billions into new wind farms from North Dakota to Texas to California had been the epitome of renewable- energy investing for hedge funds and big banks. But even though the US may still be the "Saudi Arabia of wind power," tapping that resource will be far tougher.

"We all know that with the impact of the credit crisis on the economy, there's no way that this sector will not also be hurt," Randall Swisher, executive director of the American Wind Energy Association told reporters during a teleconference call last week. With the cost of capital rising and access to credit more difficult, "eventually that's going to have an impact on our members' ability to do business," he says.

Wind power used to have the breeze at its back. This year it is the second-fastest growing source of electricity generation after natural gas. It's also winding up a banner year of building about 7,500 megawatts of new generating capacity - about 50 percent more than 2007. And wind energy seemed set to soar, buoyed by recent renewal of a vital production tax credit (PTC) from Congress.

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.

"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, Mr. Bender and others say.

The critical short-term challenge facing wind power developers is financing. …