WIND, A BOOM, A WIND JOBS BOOM

New DOE Study Shows Soaring Demand for Wind Spurs Significant Expansion in U.S. Manufacturing
July 16, 2009 (U.S. Department of Energy)

SUMMARY
2008 Wind Technologies Market Report, by Ryan Wiser and Mark Bolinger of the Lawrence Berkeley National Laboratory of the U.S. Department of Energy, details the wind industry’s “banner year” of 2008 as well as the “upheaval” in the industry that resulted from the economic downturn. More significantly, it notes “significant federal policy changes” that it predicts will drive the industry’s “aggressive expansion.”

click to enlarge

Key findings in the report:
(1) The industry set new records with 8,558 megawatts of new capacity installed on $16.4 billion in investment.
(2) Wind was 42% of all new U.S. power generation in 2008.
(3) The U.S. held the world lead in annual capacity growth and took over the world lead in cumulative capacity.
(4) Texas was the biggest state in annual capacity growth.
(5) Transmission system data shows some 300 gigawatts of wind capacity under development.

click to enlarge

(6) GE Wind remains the top U.S. turbine maker but other companies are growing.
(7) The growth in demand drove expansion of U.S. manufacturing capacity.
(8) Average turbine size increased very slightly, average wind project size decreased almost 33%.
(9) Consolidation among major developers decreased.
(10) The credit crisis slowed investment in wind.
(11) Independent developers continued to dominate the industry but utility ownership increased.
(12) Most capacity production was sold to utilities but merchant buying increased.
(13) Wind power prices were pushed up by increased costs for money, materials and manufacturing.
(14) Wind’s price remained competitive in 2008 but could be too high in 2009.
(15) Project costs rose.

click to enlarge

(16) The cost of a turbine rose less in 2008 than in recent previous years.
(17) Project performance is still getting better but is leveling.
(18) Operations and Maintenance (O&M) costs rise with the age and size of the project.
(19) Public policies favor wind more than any time in the last decade.
(20) Transmission is better but barriers remain.
(21) Integrating wind into power supplies can be done but it will cost and grid operators must attend to it.

Industry experts predicted 4,400-to-6,800 megawatts of new installed capacity for 2009 but with 2,800 megawatts already installed in the first quarter of 2009, the industry could continue to surprise. On the other hand, the industry’s assumption that the big first quarter was the result of momentum from last year should be born out in second quarter numbers.

click to enlarge

COMMENTARY
Many of the report’s key findings carry with them fascinating and important details and observations.

The record wind growth (8,500+ megawatts) was overwhelmingly bigger (60% bigger) than the previous record (5,200+ megawatts). But that’s nothing compared to what’s coming. Offshore installations is where the BIG megawatts will be generated in coming decades. The U.S. has 11 offshore projects (representing 2,000+ megawatts) in the advanced proposal stage.

From 2000-to-2004, wind was 4% of all new U.S. generating capacity, then was 12% in 2005, 18% in 2006, 35% in 2007 and 42% last year. Because it costs less and takes less time to build, wind power has supplanted coal and become developers' second choice after natural gas. And it is pressing hard on gas, which it may turn out to be a better economic choice than, when Congress enacts a price on greenhouse gas emissions (GhGs).

click to enlarge

The U.S., with a cumulative installed capacity of 25,369 megawatts, owns almost a third of the world wind market (30%). But its real potential, as demonstrated by how much of the power supply can come from wind, is virtually untapped. While Denmark gets 20% of its electricity from wind, Spain gets 13%, Portugal gets 12%, Ireland gets 9% and Germany gets 8%, the U.S. gets 1.9% of its electricity from wind. Lots of elbow room there.

Texas led U.S. growth. Though it only gets 5.3% of its power from wind, it may be nearing the limits of its capacity to add megawatts in the absence of new transmission. The next biggest growth states were Minnesota and Iowa. Both get bigger chunks of their power from wind (Iowa - 13.3% and Minnesota - 10.4%) and so will also need new transmission sooner or later.

click to enlarge

Utilities have extensive data on types of generation, where it is and what is going to be available. The 12 U.S. "Interconnection Queues" indicate there are 300 GIGAwatts (that’s 300,000 megawatts and a megawatt powers 250-to-500 homes, depending) of planned wind power capacity, 11 times the wind power now in operation. It is more than half of all generating capacity in the transmission system and twice as much as natural gas, the next biggest supply.

In recent years, GE Wind was able to supply more than half of all turbines put up in the U.S. but it now has serious competition from a host of international suppliers. It got 43% of the U.S. market in 2008. Denmark’s Vestas got 13%, Germany’s Siemens got 9%, India’s Suzlon got 9%, Spain’s Gamesa got 7%, Clipper, a U.S. company, got 7% and Japan’s Mitsubishi got 6%. Spain’s Acciona (5%) India/Germany’s Repower (1%), and several other international manufacturers entered the U.S. market for the first time.

Demand is driving growth in domestic manufacturing facilities. Turbines are getting slightly bigger, indicating technological improvement, and projects are getting significantly smaller, probably indicating a dearth of large-scale financing and an inadequacy of transmission. Consolidations dropped from 2007’s 11 to 5 in 2008, also probably indicative of tight credit. Things are expected to open up again when stimulus package provisions make their way to the marketplace.

click to enlarge

Independents installed 79% of all new wind capacity last year and own 83% of cumulative capacity but the trend of utilities buying into wind continues, with 19% of wind additions funded by utilities, who now own 15% of wind’s cumulative U.S. wind capacity. Utilities remain the biggest buyers of the electricity generated by wind but merchants are starting to get in the game. They bought 43% of new capacity last year, bringing their portion of cumulative capacity to 23%. Wholesale power prices have dropped in 2009, though, and merchants have backed away from the market until stability returns.

The cost of projects and the cost of power generation are expected to rise, due both to demand and increased expenses. Wind is expected to remain competitive, though everything is questionable until there is a resolution of the financial crisis and Congressional legislation on energy and climate, especially on GhGs, is decided.

The competition among manufacturers, the increase in more accessible domestic manufacturing facilities and the improvements in supply chains will likely bring turbine prices down. They were at ~$700/kW in the 2000-2002 period and then doubled to ~$1,400/kW through 2008 but indicators suggest there are signs of prices dropping back.

click to enlarge

Performance statistics indicate a plateauing of wind technology advances. Average generation was 22% of nameplate capacity for projects built before 1998, then 30%-to-33% for projects built from 1998-2003, and 35%-to-37% for projects installed from 2004-2007. But the rating fell slightly in the latter period, from 36.9% in 2004-05 to 35.2% in 2006 to 35.0% in 2007. The average of generation to nameplate capacity did not change in 2008. On the other hand, O&M costs for more recent projects are down, suggesting a different form of technological advancement.

Policy support for wind has literally never been better. Provisions in the stimulus packages passed by Congress in October 2008 and February 2009 extended the Production Tax Credit (PTC) for wind through 2012 and provided for an option to exchange it for a 30% Investment Tax Credit (ITC) or for a cash grant. The latter package, the American Recovery and Reinvestment Act of 2009 (ARRA) also greatly expanded Department of Energy (DOE) loan guarantees. Renewable Electricity Standards (RESs) are now in place in 29 states and Washington, D.C.

click to enlarge

New transmission is the single biggest need for all the New Energies and especially for wind projects. Some local grid expansions were funded by ARRA and other new transmission construction and smart grid trials are being planned. Also in the planning stages are Renewable Energy Zones (REZs), in which new transmission and new project development will be pre-designated and facilitated. The long term goal of a national New Energy superhighway of high voltage, intelligent transmission is unlikely to become a reality until Congress creates the power for the Federal Energy Regulatory Commission (FERC) to streamline the approvals process.

Integration of new wind supplies into the existing grid is vital to putting new capacity to work. Introducing the systems to manage such integration is expected to cost from $5-to-$10/MWh but allow as much as 30% of the grid’s peak load to be met with wind generated electricity. Integration will also allow for the use of larger balancing areas to eliminate the limitation of wind’s intermittency.

click to enlarge

QUOTES
- From the Wiser/Bolinger Wind Technologies report: “…2008 continued a string of record-breaking years for the U.S. wind industry, which has put the U.S. ahead of schedule vis-à-vis the deployment path laid out by the U.S. Department of Energy (2008) to reach 20% wind penetration by 2030.”
- From the Wiser/Bolinger Wind Technologies report: “…expectations are for a slower year in 2009, in large part due to the impact of the global recession…After a slower 2009, most predictions show market resurgence in 2010 and continuing for the immediate future, as the ARRA 2009 policy changes come into full swing, and as financing constraints are relieved…[T]hese near-term projections would maintain the nation’s early progress towards meeting 20% of its electricity demand with wind power by 2030.”