Sean Middleton Illinois Rural Electric Coop. Just as high oil prices appear to signal an imminent rise in outlook for wind energy, Congress goes dead calm.

Earlier in August, Appalachian Power, a subsidiary of Columbus, Ohio-based American Electric Power, announced it would purchase the entire output of a 187- MW wind farm being built in West Virginia. But the announcement had one huge caveat: the purchase is contingent upon the extension of federal wind-production tax credits.

The production tax credits, worth 2 cents per kWh, are set to expire at the end of December. Credits for other renewable energy sources, such as solar or geothermal, are set to expire as well. The wind industry, however, says it has a tremendous amount to lose because of its recent, rapid growth.

While both Democrats and Republicans agree the tax credits need to be extended, Congress has failed to pass an extension eight times this year. And with Congress on summer recess, the extension is unlikely to come soon enough for most  wind projects scheduled for next year, says Ben Fisher, president of Signal Wind LLC a design and build company focused on wind power, and a subsidiary of EMJ Corp., based in Chattanooga, Tennessee.

“We are seeing orders placed on hold,” Fisher says. Almost all of the company’s domestic business hinges upon the extension of the production tax credit. The projects on the books for 2009, “are becoming borderline of even being able to build next year.”

The production tax credit can mean millions each year for up to 10 years for a wind farm. Without that extra money, the financing of the projects is thrown into question. “If you take it away, it doesn’t mean that every project that is proposed for 2009 necessarily dies, but you do have to rethink the economics,” said Randall Swisher, executive director of the American Wind Energy Association.

Signal Wind The last three times Congress let wind tax credit expire, market dropped 70% in the following year.

Like the Appalachian Power announcement, power purchase agreements between wind developers and utilities often hinge upon the tax credit. In some instances, the wind project developer has an agreement that allows the developer to charge more if the tax credits aren’t approved — but those agreements are rare, Fisher says.

Congress first passed renewable energy tax credits in 1992. In 1999, 2001 and 2003, the tax credit lapsed. And each year the credit hasn’t been extended, the wind market dropped 70 percent in the year that followed, Swisher said. Next year, with the amount of work on the books, that could mean up to $19 billion of investments that sit on the sidelines.

AWEA argues the repeated lapses in the tax credit is seriously hurting the industry’s growth.

The U.S. recently became the world leader in wind capacity, at 19,549 MW. So far this year, 2,725 MW of new wind power has been installed in the U.S., with an even greater amount scheduled to be added in 2009 if the wind credit is extended next month, according to AWEA. While companies such as Signal Wind are able to adapt to the reduction in U.S. work when the credits aren’t extended— last time the company shifted to Canada — the uncertainty is keeping manufactures away from the U.S., Swisher says.

“What we’ve heard from the global companies involved is that it makes a lot more sense where there’s a clear long term commitment to technology,” he says. That means China or Europe.

A bipartisan group of Senators, called the Gang of 10, has proposed energy legislation that would extend the credit for four years, and House Speaker Nancy Pelosi has indicated that the extension will come to the floor next month. “Given 90 percent of Congress supports the policy – a lot of participants in the industry have trouble figuring out what’s taking so long,” Swisher says. “It’s pure partisanship, both parties are more focused on scoring political points.”

The bone of contention between the parties is that Democrats want to pay for the wind credits with oil and gas-related revenue. The credits have previously not been tied to any revenue source. Scott Sklar, president of The Stella Group, a firm that follows renewable energy, says he expects only a one-year extension will pass this year, and serious energy legislation will have to wait for the new Congress.

“Because it is a Presidential election year, as you know, it gets crazy with each political party trying to ruin public perceptions of the other,” Sklar says. AWEA is putting a full-court press on Congress, with a planned presence at both political conventions.

Fisher has no plans to move his workers up to Canada — just yet. If the production tax credit is extended, he expects about 1,000 people to working on projects next year. “We are still hiring and planning on the production tax credit before Congress leaves in October,” he says. Fisher says the huge amount of advertising on the Olympics and for the presidential campaigns featuring wind power has given him hope. “I’m optimistic.”