Wind power capacity additions in 2009 were buoyed, in part, by projects that were initially slated to be completed in 2008 but that carried over into 2009 when the PTC was extended, somewhat masking the underlying challenges facing the sector.
With federal incentives now extended through 2012, there is less motivation to complete projects in 2010 (though many projects will likely start construction in 2010 in order to qualify for the 30% Treasury cash grant).
As a result, though the Recovery Act has helped to alleviate financing challenges, expectations of a slower year in 2010 remain.
A variety of forecasts suggest that wind power installations in 2010 may fall within the range of 5,500 MW to 8,000 MW, a drop of 20-45% compared to the nearly 10,000 MW installed in 2009.
This contraction is reflected in results for the first half of 2010, in which just 1,240 MW of wind power were installed – i.e., 57% less than the amount installed in the first half of 2008, and 71% below the pace set in the first half of 2009.
After a slower year in 2010, these predictions show market resurgence in 2011 and 2012, with annual installations ranging from 8,100 to 15,000 MW depending on the forecast and year.
From 2010 through 2012, these forecasts predict cumulative wind power additions of 24 to 33 GW; this amount of new wind power capacity would provide roughly 30-40% of EIA’s projected growth in total U.S. electricity demand over the 2010-2012 timeframe.
Any projections beyond 2012 are rendered considerably less certain by the scheduled expiration of a number of policies at the end of that year, including the PTC, the ability to elect a 30% ITC in lieu of the PTC, and the ability to receive the 30% cash grant for wind farm projects that initiated construction by the end of 2010.
Notwithstanding the anticipated slowdown in 2010, these growth projections would likely ensure that the United States retains its 2009 position as the second-largest wind energy market in the world in terms of annual capacity additions.
Driven by rapidly growing energy demands and strong policy support, China is widely expected to lead to the world in annual wind power capacity additions in the coming years. Industrial policy and market conditions have also resulted in the growing dominance of Chinese wind turbine manufacturers within the Chinese market, and those manufacturers are beginning to explore export strategies.
U.S. manufacturing of wind turbines and components is also expected to continue to grow, as already-announced manufacturing facilities come on line, as existing facilities reach full capacity and expand, and as new announcements and investments are made. In part as a result, and in a continuation of recent trends, the historically-dominant wind turbine suppliers in the United States market are likely to face growing competition from new entrants over this timeframe.
Uncertainties about market performance even over the 2010-2012 timeframe are the result of underlying uncertainties about market and policy drivers. On the positive side, the wind power industry now has stronger federal policy support than at any time in the last decade, and state policies have become more aggressive.
Additionally there are prospects for further federal policy support through some combination of a continuation of (or variants to) the Treasury Grant program, federal RPS legislation, climate legislation, and policies intended to spur new transmission investments, as well as continued state renewable energy and climate policy initiatives. With wind turbine prices now dropping, the trend of increasing project-level costs and prices experienced over the last several years is also expected to slow and even reverse, improving the comparative economic position of wind energy.
On the other hand, with the window of eligibility for the Treasury Grant program scheduled to close at the end of 2010 and the tax equity market for wind energy not fully recovered, near-term growth may be hampered. Natural gas prices and near-term price expectations have plummeted, making wind energy’s primary competitor more economically attractive than in recent years.
And, with the much-lower wholesale electricity price environment, merchant wind power development – which had grown dramatically in recent years – may slow. The significant wind energy growth in recent years has also exceeded aggregate state RPS demands, resulting in softer demand from state RPS markets in the near term.
Wind power additions are increasingly constrained by inadequate transmission infrastructure, and while progress is being made to alleviate those constraints, the build-out of transmission infrastructure will take time. Finally, in California and the Southwest in particular, wind energy is beginning to face stiff competition with solar energy in meeting state renewable energy requirements.
Regardless of these competing trends, wind power capacity additions over the past several years, and those projected from 2010-2012, put the United States on a trajectory that may lead to 20% of the nation’s electricity demand coming from wind energy by 2030.
In May 2008, the U.S. Department of Energy, in collaboration with its national laboratories, the wind power industry, and others, published a report that analyzed the technical and economic feasibility of achieving 20% wind energy penetration by 2030. In addition to finding no insurmountable barriers to reaching 20% wind energy penetration, the report also laid out a potential wind power deployment path that started at 3.3 GW/year in 2007, increasing to 4.2 GW/year by 2009, 6.4 GW/year by 2011, 9.6 GW/year by 2013, 13.4 GW/year by 2015, and roughly 16 GW/year by 2017 and thereafter, yielding cumulative wind power capacity of 305 GW by 2030.
Historical growth over the last four years puts the United States on a trajectory exceeding this deployment path, and the projected growth presented in Table 10 would ensure that the United States remains in that position through 2012.
Ramping up to an annual installation rate of 16 GW per year, and maintaining that rate for a decade, is, however, far from pre-determined. The record 10 GW installation pace in 2009 was achieved, in part, because of the previously-pending end-of-2008 expiration of the PTC.
Moreover, federal policy towards wind energy remains uncertain after 2012. Whether the roughly 16 GW per year pace needed for wind power to contribute 20% of the nation’s electricity by 2030 can be achieved and maintained remains to be seen.
In addition to stable, long-term promotional policies, the DOE (2008) report suggests four other areas where supportive actions may be needed in order to reach such annual installation rates. First, the nation will need to invest in significant amounts of new transmission infrastructure designed to access remote wind resources.
Second, to more-effectively integrate wind power into electricity markets, larger power control regions, better wind forecasting, and increased investment in fast-responding generating plants will be required.
Third, streamlined siting and permitting procedures will need to be established to allow wind power developers to identify appropriate project locations and move from wind resource prospecting to construction quickly.
Finally, enhanced research and development efforts in both the public and private sector will be required to lower the cost of offshore wind power, and incrementally improve conventional land-based wind energy technology.
General Electric (GE) remained the number one manufacturer of wind turbines supplying the U.S. market in 2009, with 40% of domestic turbine installations. Following GE were Vestas (15%), Siemens (12%), Mitsubishi (8%), Suzlon (7%), Clipper (6%), Gamesa (6%), REpower (3%), Acciona (2%), and Nordex (1%). Other utility-scale (>100 kW) wind turbines installed in the United States in 2009 (and that fall into the “Other” category in Figure 9) include turbines from NedWind (6.5 MW), AAER (6 MW), DeWind (6 MW), Fuhrlander (4.5 MW), Goldwind (4.5 MW), RRB (2.4 MW), Elecon (0.6 MW), and Wind Energy Solutions (0.25 MW).
Primary authors: Ryan Wiser, Lawrence Berkeley National Laboratory, Mark Bolinger, Lawrence Berkeley National Laboratory. With contributions from Galen Barbose, Naïm Darghouth, Ben Hoen, and Andrew Mills (Berkeley Lab), Kevin Porter and Sari Fink (Exeter Associates), Suzanne Tegen (National Renewable Energy Laboratory).
www1.eere.energy.gov/windandhydro/pdfs/2009_wind_technologies_market_report_slides.pdf
