European wind-power firms see an opportunity in the United States' increasing interest in alternative energy. Indeed, the inroads that electricity-generating wind turbine technology has made in the U.S. are due in large part to the efforts of companies based in Europe.

A few examples:

• In 2007, German mega-utility E.ON AG bought the U.S. assets of Ireland's Airtricity Holdings for $1.4 billion.
• Danish firm Vestas Wind Systems A/S announced plans in August to build a blade and turbine factory in Colorado, adding to the production of an existing Colorado blade plant and creating 1,350 jobs.
• Last month, New York regulators gave final approval to Spanish power producer Iberdrola SA to acquire Energy East; the $4.5 billion acquisition would bring the amount of Iberdrola assets in the U.S. to about $20 billion.

Other European firms at work in the U.S. include Acciona SA and Gamesa SA of Spain; Fuhrlander AG, Nordek AG and Siemens AG, all of Germany; and several others. The Europeans have come to ply their expertise in a country where inconsistent public policy has not encouraged domestic investment.

Even with this activity, wind-power advocates worry that the industry's growth in the United States rests in the hands of the U.S. Congress and the next administration. Earlier this month, Congress threw wind advocates a bone when it attached an extension of existing subsidies as an earmark to the critical $700 billion plan to rescue the U.S. financial sector. While wind proponents expressed gratitude at the extension, the move by Congress follows a pattern of short-term support that critics say has stunted the growth of wind power in the United States.

The Production Tax Credit, or PTC, makes electricity from wind facilities cost competitive with older types of power production, including coal. The credit had been set to expire at the end of this year. It gives producers of wind-generated electricity a federal tax credit of two cents for every kilowatt hour of electricity they produce. The PTC applies to utility-scale energy producers, not small homeowner-sized systems, which receive a different tax incentives package.

But even with such tax breaks, investors still see wind energy as somewhat risky. "Renewable energy will require early adopters -- whether they be individuals, utilities, states or countries -- to pay higher prices for these sources as they are pioneered," says Michael Tomczyk, managing director of the Mack Center for Technological Innovation at Wharton. "Later, as costs come down, the commitment will be justified, especially if you factor in the tangible benefits of energy independence and the impact on pollution and global warming," Tomczyk says.

The most technologically advanced wind turbines produce electricity at a cost of about five cents per kilowatt-hour, comparable to a typical coal-burning power plant. Still, the building of wind-powered generating facilities requires investments in the millions of dollars, and lenders have been reluctant to commit funds in the past when it has appeared the Production Tax Credit was in jeopardy. According to the American Wind Energy Association (AWEA), development of new wind facilities has fallen precipitously in years when Congress has allowed the tax credit to expire. "You could make the case that our federal policy is a textbook case of how not to build a manufacturing industry," says Randall Swisher, executive director of the American Wind Energy Association in Washington, D.C. "You send the message [that] it is risky to invest in this space."

The pattern of wind power's tax credit dependency is clear: In 1999, with the PTC in place, 575 megawatts worth of wind power was added to the nation's grid. The credit was allowed to expire in 2000, and just 43 megawatts worth of wind projects were built. The credits were restored in 2001, and 1,696 megawatts of wind capacity went online, followed by just 410 megawatts of new wind power in 2002, when the credits were allowed to expire. The credits have remained in place since 2005, leading to the addition of 2,431 wind-generated megawatts that year, 2,454 in 2006 and 5,244 last year.

"Wind at present becomes viable as a result of its subsidies," says Matthew White, a business and public policy professor at Wharton. Barring a sudden technological leap, "wind would not be competitive with coal" absent incentives such as the Production Tax Credit. So, with the PTC's inconsistent history, why are so many European firms jumping into the U.S. wind energy arena? And for that matter, why are wind "farms" a much more common sight throughout Europe than in the United States?

"In Europe, there's more of a willingness to move forward on environmental protection," White said. "Europe has been a whole lot more willing to pay the short term price. That price can include the higher upfront costs of enacting more aggressive regulation. And it can also encompass subjective costs -- such as aesthetic concerns about the siting of wind turbines."

The question of how to get wind electricity to customers has posed a thorny issue as well, further slowing adoption in the United States. "Unfortunately, many 'windy' sites in the U.S. are located in remote areas far from urban centers where the electricity is needed," Tomczyk says. "Can we efficiently transmit electricity from a wind farm in South Dakota to Chicago? Another variation on this theme involves installing wind turbines on buildings. Chicago is the 'windy city': What would happen if every office building in the city had several wind turbines on the roof?"