BONN, Germany – In the old German parliament buildings in Bonn, where 22 years ago the first renewable energy feed-in tariff (FIT) in the world was introduced, uncertainty was on the minds of most speakers during the annual World Wind Energy Conference this past July. In a panel opening the event, World Wind Energy Association president He Dexin assured attendees that despite sluggish international economic growth, FIT programs being phased out in Europe and expiring incentive programs in the U.S., “the long-term fundamentals of the industry remain strong.”

A report by the D.C.-based Worldwatch Institute in May highlighted the slowdown in growth levels for the industry: Global wind power capacity grew 21 per cent in 2011, down from 24 per cent growth the year before and 31 per cent in 2009. A total of $75 billion was invested in global wind energy installations in 2011, down 22 per cent from 2010. China continued to lead growth, responsible for 43 per cent of increased capacity last year, followed by the United States with 17 per cent.

Part of the slowdown is a result of Germany and Spain moving to cut traditional FIT subsidies that originally led them to become leaders in renewable energy. These two countries, home to 21 per cent of global wind power generation, have done so partially due to the declining price of wind turbines, but also because of eurozone fiscal woes pressuring governments into austerity measures.

The United States, responsible for a fifth of global wind generation, is causing similar shocks through the industry. Assisted by the 2005 energy bill and the 2009 stimulus, the U.S. has been steadily adding wind capacity. In 2011, American wind energy expanded by 27 per cent, with $14 billion invested over that period.

Projections for 2012 show similar growth levels. Several incentive programs, led by the renewable energy production tax credit, have been credited with spurring such growth. Yet despite their success, increased political polarization over renewable energy in the U.S. Congress has led most analysts to conclude that these programs will all expire at the end of the year. As projects need an average of 18 months to be completed, wind manufacturers are already cutting jobs. Danish company Vestas laid off employees at a Colorado wind tower factory in July, stating that “uncertainty over whether Congress will extend the production tax credit is leading to a general market slowdown for wind power manufacturers and developers throughout the U.S.” The consultancy IHS Emerging Energy Research forecasts that U.S. demand will plummet 86 per cent in 2013 without the tax credit.

Surging supplies of natural gas are also affecting the domestic wind industry. New wind installations represented 32 per cent of all new electrical generation capacity brought online last year, but were eclipsed by the 49 per cent of natural gas also added to the grid. Expanded shale gas drilling has lowered prices considerably, with cheap natural gas crowding out potential utility investment in renewables and natural gas-fired power plant construction at an all-time high.

As a result of U.S. market uncertainty and FIT cutbacks in Europe, turbine manufacturers and clean energy advocates are relying on China to maintain demand. Siemens, Vestas and other leading European manufacturers have expanded their operations there in recent years, but for the first time in a decade, the amount of new wind power capacity in China declined in 2011. The slowdown is due to a systemic failure over the past decade to connect new Chinese wind turbines to the grid. According to the International Energy Agency, China bypassed the United States in total gigawatts (GW) of wind power capacity in 2010 but generated less than half the amount of wind-based electricity. Wind farm developers were incented for years by local and state governments that pushed for increased economic output by any means necessary, despite being located in areas with poor grid connectivity. For the first time last year, the central government placed caps on the number of projects each region could sign off on, with the National Energy Administration announcing it would cut the number of new wind power projects by 40 per cent in 2012.

The Chinese government has dedicated $400 billion to upgrade the grid by 2015, according to Dong Luying of the National Development and Reform Commission, the country’s top economic planning agency. At a speech in May, she explained that “China’s wind power sector used to focus on its development speed, but now more attention is directed to the quality of its development. Last year’s slowdown marked the beginning of this adjustment period.”

Wind manufacturers are now looking to Japan, after the country’s first renewable energy FIT was introduced in July, to help the country move away from its reliance on nuclear energy in the aftermath of the Fukushima disaster. Although the program offers more generous subsidies to solar manufacturers, industry analysts at CLSA Pacific estimate that wind capacity could reach 7.6 GW in four years. Brazil is another emerging market for turbines, after increasing its wind power generation by 50 per cent in 2011. Professor Everaldo Feitosa of the Brazil Wind Energy Center credits this rapid growth to policies implemented by the Brazilian National Sustainable Development Bank. The Brazilian Wind Energy Association believes this is just the start, with more than 7 GW of projects in the pipeline for completion before 2016.

With the major wind power markets all facing significant obstacles to continued levels of expansion, 2013 promises to be a difficult year for the industry.