In the early 1980's, the United States accounted for 95 percent of the world's installed wind energy capacity.
The U.S. share has since dropped precipitously; other countries have increased their capacity while U.S. capacity
stagnated. By 1997 the U.S. share had fallen to 22 percent. Three other countries made up about 54 percent (see
figure). According to Wind
Energy Developments: Incentives in Selected Countries, the decline in the U.S. capacity share was due to a combination of economic factors and
changes in government-sponsored support programs that impeded development of new capacity.
The U.S. wind industry was born in 1981
in the aftermath of the world oil crises of 1973-1974 and 1978-1979. Wind energy was not cost-competitive with
fossil-fuel energy, but Federal legislation guaranteed a market for wind-generated power and offered generous tax
credits to developers of wind energy. Combined Federal and State investment tax credits could amount to as much
as 55 percent of investments in wind energy projects.
However, 1986 marked the beginning of the slowdown in U.S. wind energy development. The availability of relatively
cheap oil and natural gas, coupled with the expiration of Federal tax credits at the end of 1985, meant that wind
energy was more costly relative to fossil fuels than ever. The tax credit incentives had been more effective in
building capacity than in maintaining productivity, and wind energy generating technology failed to advance as
anticipated. Some projects, plagued by high costs, operated at capacity factors as low 5 percent, or failed altogether.
In contrast, Germany and Denmark, which have the world's largest and third-largest wind energy capacities respectively,
have increased their wind energy production dramatically over the past few years. Both countries require electric
utilities to buy electricity from wind generators at prices near the prevailing retail rate, and Germany offers
loans at low interest rates. Several states in India, which has the fourth largest capacity, offer generous tax
incentives.
The article outlines incentives for wind energy production offered by some countries, including price guarantees.
It suggests that in the absence of a government mandate or production tax credit, energy investors will find U.S.
wind energy too risky in the uncertain climate of deregulation and competitive pricing.
This article will appear in Renewable Energy Annual: Issues and Trends, which will be published early in 1999.
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File last modified:
November 25, 1998
