TAX CREDIT TAILWIND
Congress restores tax credit for small wind
There hasn’t been much of a breeze behind the future of small wind lately.
But Mike Bergey, president and CEO of Norman-based Bergey Windpower, is hopeful that will change, thanks in part to Congress’ restoration of an investment tax credit for such systems.
Bergey said sales of his company’s 10 kilowatt turbine peaked in 2012 at about $8 million, when it built and sold about 300 of them for its customers.
Since then, however, Bergey said prices dropped dramatically on solar modules installed in the U.S. to generate electricity for homes, farms and small businesses.
Bergey attributes a 75 percent decline in the price of solar panels to an oversupply created when the Chinese government poured more than $40 billion into the solar module construction industry within its country.
In turn, that ballooned the supply of solar modules in the U.S., driving down their costs for consumers.
“If you go back seven or eight years, small wind had about a 30 percent cost advantage over solar,” Bergey said. “But with the drop in solar module prices, the volume production of inverters and the larger workforces involved, we are now at about a 30 to 35 percent disadvantage, so it flipped around, and that created quite a problem for Bergey Windpower.”
Consequently, he said his business saw its distribution network and its domestic sales decline.
“Even though we don’t really sell very much here in Oklahoma, we really felt a lot of pain throughout the rest of the country where we do sell systems,” he said. “And the tax credit situation was just salt in the wound.”
Efficiency improved
Bergey said getting the investment tax credit restored for small wind and other “orphaned technologies” was important to help make those types of energy systems more competitive against small solar, which never saw its investment tax credit eliminated.
However, because pricing for solar modules has declined so dramatically, it remains an attractive technology to use for home, farm and small business owners looking to supplement their power.
“We saw the writing on the wall four or five years ago as solar prices were coming down,” Bergey said.
“We looked at ways to improve the performance, and therefore the economics of our existing turbine. And while we came up with a number of minor improvements, they weren’t enough to allow us to compete with where solar was and where we saw it going.”
That, he continued, prompted Bergey Windpower to completely reexamine its system.
“We essentially abandoned the recipe we had been using for 30 years, which had been successful but could no longer compete in that new economic reality,” and began developing its latest technology during the past three years, he said.
The new product, named the Bergey Excel 15, features a 15 kilowatt turbine that Bergey said is 40 percent more efficient, 50 percent lower in energy costs through using a high efficiency rotor and a more powerful direct-drive alternator — features that reduce its payback period by half. It also operates about 60 percent more quietly.
He said the model is undergoing certification tests required by the federal government before U.S. buyers will be able to qualify for the investment tax credit, which allows them to deduct 30 percent of the expense to buy and install the system from their tax obligations.
The typical cost to install a Bergey Windpower system is $70,000, meaning the purchaser could qualify for a federal tax credit of about $21,000. Bergey said he expects that certification to be made by the end of May.
“We are very excited to be launching that this spring, and we expect to be able to compete with Chinese solar modules,” Bergey said.
Association applauds change
The Distributed Wind Energy Association, an organization that Bergey is a past president of, applauded the support small wind received from Congress when it approved its budget measure earlier this month.
In particular, Bergey extended his thanks to U.S. Rep. Tom Cole, R-Oklahoma, for his support.
“For the past couple of years, he has been doing everything he can to help correct the imbalance on the tax credits,” he said.
As part of the bill, Congress set the investment tax credit for small wind systems at the same level as it provides for small solar installations. Under the measure, both will decline in value before expiring in 2022.
Other association officers and industry executives said a change in the tax credits will benefit small wind industry and the owners of homes, farms and businesses who chose to invest in the technology to supplement their electrical supplies.
For Bergey Windpower, Bergey said he expects its most active domestic markets will continue to be in New York and California.
He estimated a homeowner, farm owner or small business owner in central Oklahoma might recover their total cost of installation of a Bergey Excel 15 in seven to eight years through energy savings provided by the system, adding that is an important aspect purchasers look for when considering what to buy. The system is supplemental, meaning owners can expect it will produce enough electricity to power an all-electric heat and air system or to supply daily electrical vehicle charges.
“The economics depend upon the costs of installation and the value of the electricity. Our electricity rates are relatively low here (in Oklahoma), so this has not been an active market, either for wind or solar at the home or farm scale,” Bergey said.
Plus, Oklahoma never has offered a state tax incentive for its residents to buy the system.
“Our largest export market is Japan. In fact, this year, we will export more than we will sell in the U.S.”