New U.S. wind turbine installations have slowed significantly this year compared to 2009, and the decline is having consequences. While the industry pins most of the blame for the slowdown on insufficiently aggressive federal energy policies, I wonder whether wind power, like housing, might have been caught up in an investment bubble that has finally popped.The idea of a wind bubble goes against all conventional wisdom, including the importance of expanding electricity generation from low-emission sources to mitigate climate change; the U.S.' desire to build a "new energy" economy for energy security and competitive reasons; and the persistent mantra of the green jobs that are supposed to turn the economy around. Yet every bubble must have a compelling, plausible narrative, or it would never take off.
There are at least two ways to look at the charts of annual and quarterly U.S. wind turbine installations on pages 2 and 3 of the Q310 Market Report from the American Wind Energy Association. Customary perspective would attribute the 2006 dramatic increase in wind installations, which set records in each of the next three years, to the rapid scaling of an industry that many envision supplying 20% of U.S. electricity generation within 20 years. This growth has been supported by various incentives and mandates, including the renewable production tax credit (PTC), stimulus grants, etc. But it's hard to explain why installations fell so much this year with these benefits, other than the imminent expiration of stimulus-grant eligibility. How can we attribute this year's drop in installations to the absence of a policy—either a national renewable electricity standard or a comprehensive climate bill—that we've never had? How could wind be in a bubble, and why did that bubble only pop now, roughly two years after the other bubbles?
