Houston (Platts)--19Dec2012/522 pm EST/2222 GMT

Two key wind subsidies set to expire at the end of December have been pushing new wind installations to record levels, the US Energy Information Administration said Wednesday in a report.

The report said that if all the planned wind capacity expected to come online by the end of the month does so then "wind capacity additions could top 12,000 MW for this year. This would account for 45% of total additions and exceed capacity additions from any other fuel source, including natural gas, which was the leading fuel source for electric generating capacity additions in 2010 and 2011."

"Many wind projects are planning to come online before the end of 2012, in advance of the possible expiration of a federal incentive, the wind production tax credit. It appears that wind developers are pushing to complete projects in 2012 to qualify for the PTC," it added.

Though the EIA report does not mention it, the wind industry has also been in hurry-up mode all year because the Department of the Treasury's 1603 cash grant program ends December 31, specifically for wind projects that were under construction or had "safe harbor" status prior to the end of 2011.

A level of 12,000 MW of new installations would be an annual record, and would push total installed wind power generation capacity above 58,000 MW.

The American Wind Energy Association has been estimating over 11,000 MW of new installations for this year.

According to a November 21 EIA report, system-wide generating capacity in the US totaled 1,056,124 MW at the end of September. Wind generation is now roughly 5.5% of that total.

That November EIA report went on to say that through the first nine months of 2012, the US had added 14,157 MW of new capacity, while there had been 9,284 MW of capacity retired. In the first three quarters of 2012, wind developers installed 4,728 MW of new capacity, according to AWEA.

Total US wind installations in 2011 were 6,816 MW, while in 2010 installations totaled 5,214 MW. In 2009, the year that the government started its 1603 cash reimbursement program, wind installations reached a record 10,000 MW.

Treasury's 1603 cash reimbursement is equal to 30% of a project's construction cost and is made in lump-sum payments shortly after a project is placed into service.

Alternatively, developers have been able to opt for the 2.2 cents/kWh tax credit that is tied to a wind farm's production. Firms choosing the PTC are able to reduce their federal income tax payments for ten years.

The value to wind farm developers of the two different types of subsidies is roughly equivalent, but both expire December 31.

The 1603 program was created by Congress in the February 2009 American Recovery and Reinvestment Act, otherwise known as the stimulus bill.

Following the 2008 financial crisis, Congress hoped to boost development of all forms of renewables, including wind, solar, geothermal, biomass, landfill and fuel cells, with a cash subsidy.

From September 2009 through September 10, 2012, the Treasury had made just over $14 billion in reimbursements, with over $10 billion going to wind farm developers, and more than $3 billion going to solar developers.

The next update by Treasury on its total 1603 reimbursements is expected soon, and could show an increase of as much as $4 billion between September 10 and the end of the year.

Only the 1603 reimbursements to wind developers are coming to a halt at the end of this year, with the "in service" deadlines for big utility-scale solar projects that were begun before the end of 2011 extended out to January 1, 2017.

The PTC was created by Congress in 1992. Congress let the credit expire three times between 1999 and 2004, though each time lawmakers retroactively extended it. In each two-year cycle of expiration and re-extension, new installations hit high levels, and that was then followed by retrenchment.

At the end of the third quarter, AWEA said there was about 8,400 MW of new capacity under construction. AWEA and industry executives have routinely said they expect a large portion of that 8,400 MW to be completed by year's end.

Some industry executives have projected a significant fall-off in new wind installations in 2013, to perhaps as low as 2,000 MW, whether the PTC is extended in the 11th hour, or not.

Turbine orders for 2013 began declining in September, forcing a number of wind equipment manufacturers to cut personnel and reduce their capacity.

--Jeffrey Ryser, jeffrey_ryser@platts.com --Edited by Keiron Greenhalgh, keiron_greenhalgh@platts.com