Shocker: Without Subsidies, Wind Tower Company Falters

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Written By:
Rob Port

Aug 7, 2012
10:28am

According to reports, Otter Tail Corp. is putting their wind turbine manufacturer DMI Industries up for sale to a yet-to-be-identified buyer. The reason? The company is blaming the lack of a national energy policy, and cheap natural gas (thanks to fracking!), but really it’s the fact that the federal government pulled the subsidies:

Otter Tail Corp. broke the news on its website late Monday with its second-quarter earnings announcement, saying it had entered into a nonbinding letter of interest to sell DMI’s property, plant and equipment for $20 million.

“The wind industry’s present economics, substantially driven by the absence of a Production Tax Credit renewal by the U.S. Congress, the lack of a predictable national energy policy, and by low natural gas prices, has contributed to a dramatic decline in the demand for wind towers,” the news release from Olsen stated. “This market circumstance is untenable to Otter Tail Corporation.”

The sale is expected to close no later than Jan. 3, 2013.

Last year another North Daokta wind power company, LM Wind Power in Grand Forks, reported that demand for their services “fell off a cliff” when the federal subsidies ended. “Demand fell between 73 percent and 93 percent in 1999, 2001 and 2003 when the tax credit was allowed to expire,” reported the Grand Forks Herald.

The point is that demand for wind power was a direct result not of consumer demand – wind power is expensive and unreliable – but because of government subsidies. With wind power, much like other “green energy” investments, the government took a “build it and they will come” approach believing that if they subsidized the wind turbines into existence somehow they’d find a niche in our energy markets.

Rather than letting supply follow demand, the government subsidized the supply into existence and then expected the demand to materialize. As we see now, that doesn’t work out so well.

Just more of our tax dollars down the drain.

I take no great satisfaction in failure of this business, or the fact that the jobs of hundreds of people are at risk. But wind power subsidies were always bad policy, and now we’re forced to live with the consequences of those poor decisions.