WIND: THINGS ARE SO GOOD, THEY’RE BAD

Insiders say the industry is beginning to adapt to demand and the upward pressure on prices is easing. They also say that the proposed long term extension of the income tax credit to renewable energy producers in the pending congressional energy bill would help settle things by establishing a longer frame of reference for the business.

Turbines shortage boosts wind-power costs
Gail Kinsey Hill, August 31, 2007 (The Oregonian via The Seattle Times)

WHO
Tom Karier, chairman, Northwest Power and Conservation Council; Ed Lowe, general manager, GE Energy;

2007 growth is projected to be larger than last year. (click to enlarge)

WHAT
Wind energy installation costs are up with demand for turbines, parts and labor.

WHEN
- The crunch is 3 years old and beginning to ease. Supply and demand are expected to even out by 2008 unless a national Renewable Electricity Standard stimulates new demand.
- DOE estimates turbine price rose 17% in 2006 and 14% so far in 2007: a 1.5megawatt turbine was $2.2 million in 2006 and $2.5 million this year.

WHERE
- The shortages are nationwide but acute in western states (California, Washington, Oregon) with high winds and big plans for wind development.
- Oregon will double its capacity in the Columbia River Gorge

WHY
- Turbines presently cost $2 to $2.5 million and there is a 2-year waiting list. Prior planning, in the form of big players buying up all the turbines in sight, has prevented any projects from being delayed so far. Example: PPM Energy, owned by Spanish giant Iberdrola, will increase its projects by 50% thru 2010.
- Smaller developers who found they could not meet potential orders have put projects on hold or sold out, leading to some industry consolidation. Example: Paul Woodin of Western Wind Power lost a project in the Columbia River Gorge because he could not get turbines.
- The worst effect is on price and the increased costs are still working their way to consumers.
- Installations with deep pockets do better. PacificCorp, owned by MidAmerican Energy which is owned by warren Buffet’s Berkshire Hathaway, is able to buy big enough to get its order filled by GE Energy.
- GE has made approximately 50% of all US working wind turbines. It has increased production five times since it bought the business from Enron in 2002. It is sold out through 2009.
- With new competition and expanded capacity, the crunch is easing.

There will be much more green on the map next year. (click to enlarge)

QUOTES
- Karier: "It's almost the worst possible world…"
- Lowe: "We absolutely are increasing capacity so we can meet demand…"
- Woodin last year: "The big players bought up everything available…There was nothing left."
- Woodin this year: "I've gone from being concerned a year ago to being optimistic."