Can huge Mojave wind farm boost faltering wind power industry?

What some tout as the nation's biggest wind power plant broke ground last week in the Mojave Desert, where its developers hope to one day spin enough giant wind turbines to equal the generating capacity of three nuclear power plants.

The Alta Wind Energy Center being built by Terra-Gen Power of New York is a major gust of renewable energy. It has 290 wind turbines spread across 9,000 acres 75 miles north of Los Angeles and is expected to serve 275,000 homes – for starters.

If demand stays strong, a second group of 300 turbines is planned for 2015 and later additions could grow the operation to 3,000 megawatts and millions of customers.

IN PICTURES: The answer is blowing in the wind

But all that wind-energy optimism blowing in southern California belies an uncharacteristically weak and bleak short-term outlook for US wind power. Despite a banner year in 2009, the wind-energy industry now faces a nasty triple threat: sagging power demand, falling electricity prices, and low natural gas prices.

What those three add up to is suddenly weak demand for wind power. After years of record growth, the industry is now looking at a 36 percent to 46 percent drop in new wind-power installations this year when compared with 2009, says Matt Kaplan, a senior analyst with IHS Emerging Energy Research in Cambridge, Mass.

Just over a year ago the financial meltdown made the biggest concern of wind developers merely finding financing. Wind power was cheap enough to sell itself on the open energy markets of the Northeast and west coast where it competes with natural gas-fired generators and nuclear energy generators. Now flip that picture, Mr. Kaplan says.

Federal financing is in place, Wall Street is loosening a bit, but wind power is suddenly being undercut by cheap electricity generated by natural-gas fired turbines. The gas is cheap because the widespread use of hydraulic fracturing in shale formations across the country has unleashed a torrent of fuel and torpedoed natural gas prices. Add to that an economy that's using less energy because it's just not revving that fast.

"Last year the story was how do we get financing for wind power," Kaplan says. "This year the story changed."

A new Department of Energy report released Wednesday outlined some of the issues behind wind power's lagging competitiveness. Driven by higher turbine and other component costs, the sale price of bundled power rose about $61 per megawatt hour – about double the level of just eight years ago. At the same time, however, wholesale electricity prices – driven by cheap natural gas – have fallen.

1 | 2

Next