* US wind turbine market seen hit by tax credit expiry
* US market "very, very busy" in 2012 - Vestas CEO
* View of likely drop in line with analysts' estimates
By John Acher
AARHUS, Denmark, June 10 The head of the world's
biggest wind turbine maker, Vestas, said on Sunday that
the U.S. wind turbine market is likely to fall by 80 percent
next year because of the expected expiry of an important tax
The U.S. production tax credit (PTC) for renewable energy is
due to finish at the end of 2012, and, in an election year, it
is widely believed that Congress will not pass legislation to
renew it before the expiry.
The prospect of a lapse for the PTC is just one of the
problems troubling the renewable energy sector amid a global
economic slump, which has hit support from governments forced to
cut budgets and delayed much investment in energy projects.
But the prospect of the PTC lapse has boosted activity in
the U.S. market this year ahead of the expiry.
"In the United States, the market this year is very, very
busy," Vestas Chief Executive Ditlev Engel told a gathering of
EU European affairs ministers and other senior officials at
Vestas' research and development centre in the Danish town of
Aarhus on the Jutland peninsula.
"But because of the potential lapse of the regulatory
framework in the U.S., this market will probably go down 80
percent next year," he said.
That view of a potentially steep drop was in line with
analysts' estimates cited earlier by Vestas, including in
material provided to shareholders before the annual general
meeting in March.
But Engel's remarks made it clearer than ever that the
Danish company now also sees that as the likely scenario for the
U.S. market next year.
In the material sent to shareholders in March, Vestas,
citing the American Wind Energy Association, said the last time
the PTC was abolished in 2002, more than 75 percent of the
market "disappeared from one year to the next".
Vestas cited a study from IHS Emerging Energy Research
showing there is a risk that the U.S. market could drop from
about 11 gigawatts (GW) in 2012 to just over 2 GW in 2013 if the
PTC is abolished and added: "Such an 80 percent decline
would be even worse than what we witnessed a decade ago."
The PTC gives a 2.2-cent per kilowatt-hour benefit for the
first 10 years of a renewable energy facility's operation.
Engel declined to say how Vestas planned to cope with such a
plunge in the U.S. market. He referred to the company's earlier
statements that it will decide in the third quarter whether it
will need to adjust U.S. capacity and jobs.
When it announced plans for 2,335 job cuts in Europe in
January, Vestas said it may need to cut a further 1,600 U.S.
jobs if the production tax credit ends.
Vestas employs 3,500 people in the United States, mainly at
four manufacturing plants in Colorado.
"It is very difficult to keep them employed if there is no
market," Engel said.
Vestas does not provide figures separately for the size of
its U.S. business, but the Americas region accounted for 31
percent of group revenues in the first quarter.
Engel told the gathering of European Union ministers and
other senior officials that the U.S. example showed the need for
a predictable regulatory framework.
"I sometimes say to those involved in other sectors,
'Imagine if you are told that next year you can only use 20
percent of your capacity,'" Engel said. "That is of course not
the best way to move on to make long-term plans."
Engel said he would meet next week in London with executives
from large pension insurance groups interested in investing in
the wind power sector.
"They will only do so if the regulatory framework is there,"
he said, urging the EU officials to put in place regulations for
a single market for energy and for a truly Europe-wide
He said the wind turbine industry had become truly global,
which heightened the importance of competitiveness.
Many Chinese competitors have emerged in the past five
years, although they are still predominantly focused on that
country's market, Engel said.
"Therefore, our ability to keep focusing on innovation and
development is absolutely essential for us," he said. "But it
will only happen if there is transparency, longevity and
certainty in public policy. Otherwise it is going to be very