In early 2009, the American Wind Energy Association (AWEA) and industry experts predicted that the year would see a drop in the amount of wind capacity installed in the United States. The continuing recession, lack of tax credit financing and a reduction in demand for energy were expected to cause a drop in installations by as much as 50% from 2008 levels. However, yesterday after the numbers were tallied, it turned out to be another record breaking year for the U.S. wind energy industry with nearly 10,000 megawatts (MW) put in the ground.

The 9,922 MW installed last year expanded the nation’s wind plant fleet by 39% and brought total wind power generating capacity in the U.S. to over 35,000 MW. The five-year average annual growth rate for the industry is now 39%, up from 32% between 2003 and 2008.

These new projects place wind power alongside natural gas as the leading source of new electricity generation for the country. Together, the two sources account for about 80% of the new capacity added in the country last year. The wind energy industry brought over 4,000 MW of new capacity online in the fourth quarter of 2009 alone.

“The U.S. wind energy industry shattered all installation records in 2009, chalking up the Recovery Act as a historic success in creating jobs, avoiding carbon and protecting consumers,” said Denise Bode, AWEA’s CEO. “But U.S. wind turbine manufacturing — the canary in the mine — is down compared to last year’s levels, and needs long-term policy certainty and market pull in order to grow.”

In a conference call, Bode called for the U.S. to set hard national targets for renewables, which would provide the incentive for wind companies to set up manufacturing facilities in the country.

Broken down by state, total installation numbers show that Texas continues to lead the states with a total of 9,410 MW installed. Iowa is second with 3,670 MW installed; California is third with 2,794 installed; Washington is fourth with 1,980 MW installed and Minnesota rounds out the top five states with 1,809 MW of capacity installed.

Texas also led the way in added capacity in 2009, with 2,292 MW installed. Other leading states in 2009 included Indiana with 905 MW, Iowa with 879 MW, Oregon with 691 MW and Illinois with 632 MW. The number of states with at least one utility scale project rose to 36 in 2009.

The industry cites the American Recovery and Reinvestment Act (ARRA) and the clear commitment to renewables from the Obama Administration as key drivers of the year’s success. The quick action on releasing ARRA cash grants for wind projects in the middle of last summer helped to free up capital for the industry. Wind developers took advantage of much of the $2 billion in grants that were released and built out 44 wind projects in 22 states, representing 3,200 MW of installed capacity.

The year wasn’t an unqualified success, however. The lack of a long-term policy at the federal level, combined with the continuing reticence of investors to get back into the manufacturing sector caused a drop in investment in wind manufacturing compared to 2008, with one-third fewer wind power manufacturing facilities online, announced and expanded in 2009.

Steve Sawyer, chairman of the Global Wind Energy Council said that the downturn in U.S. manufacturing and demand for new turbines is in line with many markets around the world and is a symptom of the recession.

“It was a tough year obviously, especially at the beginning when we felt the real aftershocks of the financial meltdown in the fall of 2008. There were not an awful lot of new orders,” Sawyer said. “It’s a bit of a different world and I’m hoping that the wind market continues to recover.”

The result was net job losses in the manufacturing sector in the U.S., which were compounded by low orders and high inventory. Because more jobs were added in operations, maintanence and construction, total nation-wide job numbers in the industry remained flat at 85,000. This is in some ways welcome news to the industry, which expected to lose between 25 and 50% of its workforce without the federal government’s investment through the ARRA.

Recovery Act incentives spurred the growth of construction, operations, maintenance and management jobs, helping the industry to save and create jobs in those sectors.

The manufacturing sector did receive a boost last month when it was announced that US $350 million in tax credits would go to more than 50 companies to invest in manufacturing of towers, blades, gears, gearboxes, generators, nacelles assembly and other components. AWEA cautioned that some of these projects will only move forward if other political action, like passing a national renewable energy target, is taken.

The noticeable disconnect between record installations and a drop in manufacturing investment was the result of the availability of large inventories of turbines that followed the market’s collapse in late 2008, according to AWEA. The development of a “grey market” of developer-to-developer turbine sales also led to fewer new turbine orders in 2009.

Looking forward, AWEA said that it will be critical for Congress to pass an energy bill that includes a strong renewable energy target in order for the industry to continue its growth.

Passing such a bill could be a challenge, as Democrats no longer hold a 60-vote majority in the Senate. Gramlich said that Congressional Democrats will likely reevaluate their agenda and move forward on a smaller energy bill before the midterm elections this coming fall.

AWEA’s projections for 2010 remain murky. Gramlich said that if there is a “strong political and market signal,” the U.S. could see as much as 10 gigawatts (GW) installed again this year, which would include the 3 GW currently under construction. Without that signal, AWEA cautioned that it could be much less, especially if natural gas prices remain at their current levels and domestic manufacturing doesn’t rebound.

Scott Sklar, president of the renewable energy consulting firm The Stella Group Ltd., said that he sees the 2009 wind numbers as part of positive trend in the industry that he expects to continue through this year, despite ongoing economic problems.

“The wind data confirms a cleantech 2009 trend, essentially that all energy efficiency and renewable energy markets expanded significantly during he height or the world economic crises. Sales should increase again in 2010,” Sklar said.