TODAY’S STUDY: THE LATEST RESEARCH ON THE COST OF PV SUN

Residential, Commercial, and Utility-Scale Photovoltaic (PV) System Prices in the United States: Current Drivers and Cost-Reduction Opportunities

Alan Goodrich, Ted James, and Michael Woodhouse, February 2012 (National Renewable Energy Laboratory)

Executive Summary

The price of photovoltaic (PV) systems in the United States (i.e., the cost to the system owner) has dropped precipitously in recent years, led by substantial reductions in global PV module prices. However, system cost reductions are not necessarily realized or realized in a timely manner by many customers. Many reasons exist for the apparent disconnects between installation costs, component prices, and system prices; most notable is the impact of Fair Market Value considerations on system prices. To guide policy and research and development strategy decisions, it is necessary to develop a granular perspective on the factors that underlie PV system prices and to eliminate subjective pricing parameters. This report’s analysis of the overnight capital costs (cash purchase) paid for PV systems attempts to establish an objective methodology that most closely approximates the book value of PV system assets.

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The analysis shows the following benchmark 2010 U.S. PV system prices (cash purchase, before subsidy and considering reported target installer operating overhead and profit margins):1

• $5.71/WP DC – 5 kWP DC residential rooftop

• $4.59/WP DC – 217 kWP DC commercial rooftop

• $3.80/WP DC – 187.5 MWP DC fixed-axis utility-scale ground mount

• $4.40/WP DC – 187.5 MWP DC one-axis utility-scale ground mount.

Significant variation (standard deviations of 5%–8%) exists in these estimates due to regional and site-specific cost factors. Most notable is the impact that the wide range of U.S. labor rates and installer productivity (experience) factors can have on installation costs. This uncertainty analysis excluded the impact of system size, which can also play a significant role in determining installed system prices.

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Although the cost structure of PV systems designed for use in each market segment are very different, module price and performance remains a significant opportunity for future cost reductions across all PV sectors. In addition to the expected evolutionary cost reductions at the module level (price and efficiency enhancement), advanced installation methods, such as unitized construction techniques, are expected to provide considerable installation labor and materials-related cost benefits by 2020. As the U.S. market matures, competition among installers, as well as improved supply chain and regulatory costs, will likely contribute to significant cost reductions by 2020. This dynamic has been observed in the German PV market. The analysis shows the following 2020 evolutionary PV system price estimates, which are compared with the price targets for 2020 set under the U.S. Department of Energy’s SunShot Initiative:

• $2.29/WP DC – 5 kWP DC residential rooftop (SunShot target: $1.50/WP DC)

• $1.99/WP DC – 217 kWP DC commercial rooftop (SunShot target: $1.25/WP DC)

• $1.71/ WP DC – 187.5 MWP DC fixed-axis utility-scale ground mount (SunShot target: $1.00/WP DC)

• $1.91/ WP DC – 187.5 MWP DC one-axis utility-scale ground mount (modified-SunShot target: $1.20/WP DC).

As these results show, the evolutionary estimates of U.S. PV system prices fall short of the 2020 SunShot targets. This highlights the challenges that remain before solar energy can compete with incumbent electricity technologies without subsidy.

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Introduction

Unlike traditional energy-production technologies that have ongoing consumables costs, nearly all of the costs for photovoltaic (PV) systems must be paid at the beginning. Reducing those initial capital costs is crucial to reducing the cost of solar electricity. In addition to module price, many factors contribute to the price of a PV system, including installation labor, power electronics, permitting and other regulatory costs, and—in the case of ground-mount systems—site acquisition and preparation costs.

Under its SunShot Initiative, the U.S. Department of Energy (DOE) has established very aggressive system price targets for each of the three major PV market sectors: residential rooftop, commercial rooftop, and utility-scale ground mount. Achieving these targets will require total system cost reductions of approximately 75% by 2020. Industry stakeholders must understand the ever-changing PV system cost structure. As module prices continue to fall, the contribution of non-module costs to the cost of solar energy will increase. There are also critical relationships between system components, such as the relationship between module conversion efficiency and non-module area-related costs and the relationship between module configuration and installation methods. Research and development (R&D) managers, policymakers, system installers, and component manufacturers must understand the current cost of PV systems in adequate detail to allocate effectively the resources needed for further cost reductions and to design effective market policies. The resolution into PV system price drivers that is required for these decisions is difficult to attain from surveys of system prices, or by retrospective means. Results deviate based on regional, installer, and job-specific details, making accurate price comparisons between systems very difficult, unless conducted from the bottom up.

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This report presents detailed, bottom-up 2010 benchmark system prices for residential and commercial rooftop systems and utility-scale ground-mount systems. These results are intended to depict the installed price2 for U.S. PV systems in the second half of 2010, i.e., the unsubsidized cost (cash purchase) of the system from the owner’s perspective. For each system type, the major cost drivers are identified, and the sensitivities to key assumptions (e.g., module efficiency, system scale) are presented.

Following the benchmark system price analysis, this report presents results of a bottom-up analysis of potential PV system price reductions through 2020, assuming an evolutionary path of technological and market improvement. These projections are compared with the 2020 system price targets established under the SunShot Initiative. The difference between the evolutionary projections and SunShot targets highlights the need for innovative system designs and installation methods to complement module-level cost reductions.

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Conclusion: PV Price Reductions—the Road Ahead

Because of the rapid U.S. PV system cost reductions resulting from global module price declines, market price data have become insufficient for providing policy makers and industry stakeholders with an accurate and current understanding of system-price drivers. A time-lag effect and the dynamics of a nascent industry disconnect reported system prices from underlying system costs. This report shows an objective methodology for approximating the underlying costs of PV systems with the resolution necessary for understanding system price drivers. Comparing these objective values with market price data provides valuable insights into the U.S. PV market’s inefficiencies, which may be useful for developing policies and practices that address these inefficiencies. Understanding the forces driving PV system price reductions—and their limitations—is also important.

The price of U.S. PV systems has fallen by nearly 30% since the second half of 2010, and further near-term price reductions are likely as the U.S. market matures. Most PV system components are based on commodities that have global prices. Thus, installation costs are largely responsible for the disparities in PV system prices among different countries and regions. The diffusion of installation knowledge and expertise throughout the U.S. market, increased local competition, and consolidation of U.S. installation companies should reduce these disparities substantially. Based on evidence from the more mature German PV market, factors such as improved installer productivity, reduced installer overhead and profit (due to competition), lower supply chain costs, and lower regulatory costs could reduce 2011 U.S. benchmark PV system prices by an additional 40%.

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The tight polysilicon supply and high prices during 2007–2008 may also help reduce PV system prices in the near term. Polysilicon is the feedstock for the dominant c-Si PV technology. The recent price spike caused new entrants to build polysilicon production facilities, many of which are now coming online. The resulting overcapacity of polysilicon—along with weakening European demand for c-Si modules—has driven polysilicon contract prices down by more than half compared with contract prices in 2008. In addition, the 2007–2008 polysilicon shortage encouraged larger-scale production of thin film alternatives to c-Si PV, which also has contributed to lower global PV module prices. At the same time, the larger polysilicon production base has reduced the likelihood of another polysilicon shortage/price imbalance as severe as the one in 2007–2008.

The abovementioned factors likely will contribute to lower U.S. PV system prices in the coming years. This report provides detailed roadmaps to evolutionary c-Si PV system price reductions and performance improvements, including substantial reductions in module and non-module costs. By 2020, these roadmaps would enable U.S. PV systems to approach—but not meet—DOE’s SunShot Initiative price targets. To accelerate PV price reduction toward meeting these aggressive targets, revolutionary improvements to module and non-module system components and installation methods are needed.

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QUICK NEWS, April 30: MILITARY VETS FOR WIND; NOT MORE OR LESS GOVERNMENT, JUST SMART GOVERNMENT; GIGAWATTS OF SUN ON LA’S ROOFS

MILITARY VETS FOR WIND Vets group: Wind energy critical to America's security

April 27, 2012 (Wind Energy Weekly)

"…Congressman Mike Thompson (D-Calif.) joined [retired Marine Corps Lieutenant General John Castellaw; Mike Breen, vice president of the Truman National Security Project; and Jeff Duff of Airstreams Renewables, a company that makes a point of hiring veterans] to talk about the importance and urgency of extending the federal Production Tax Credit (PTC) for wind energy… The group discussed how critical renewing the PTC is to America’s economic and national security.

"The PTC, they said, is an important federal policy incentive without which 37,000 jobs and $10-20 billion of domestic investment would be lost next year and thereafter…"

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"…Thompson, a Vietnam Army veteran and member of the House Ways and Means Committee, which [just] met on the PTC and other possible tax extensions…[said that extending the] tax incentives will give businesses certainty, help create and save more than 50,000 American jobs in the next four years, and allow [the U.S.] to strengthen our national security by reducing our dependence on foreign oil…

"Wind power is a critical part of America’s energy independence. The growth of wind energy, which produces enough electricity to power 12 million homes, has been fueled by the PTC, wind power’s primary, performance-based policy incentive…Breen, who served in both Afghanistan and Iraq...[said the U.S. would] need sources of energy [it] can rely on in the 21st Century…"

NOT MORE OR LESS GOVERNMENT, JUST SMART GOVERNMENT Smart Government Technologies; Intelligent Systems for the Management of Smart Sustainable Cities and Communities: Technology Trends, Market Analysis, and Global Forecasts

Q2 2012 (Pike Research)

"…[T]he growing interest in smart cities and communities is putting the spotlight on the smarter government operations that must guide their development. Smart government can be defined as the use of innovative policies, business models, and technology to address the financial, environmental, and service challenges facing public sector organizations. Smart government encompasses strategy and policy definition, specific applications and technologies to help improve service delivery and the establishment of new platforms for communication, data sharing, and application development. "Smart government builds on the IT infrastructure investments made by the public sector over the last decade. Back-office systems have helped improve process efficiency and the integration of services. Front-office systems have been adapted to support multi-channel communication with citizens and a growing range of transactional services. Smart government continues this transformation and also embraces innovations happening in areas such as energy, transport, and waste management…"

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"This Pike Research report analyzes the global market opportunity for smart government technologies. It assesses the business drivers, market forces, and technology trends that are transforming the use of ICT and related technologies in smart cities and communities.

"The study forecasts the size and growth of the market for smart government technologies through 2017, and it also forecasts the growth in smart government data analytics and cloud-based services between 2011 and 2017…"

GIGAWATTS OF SUN ON LA’S ROOFS Los Angeles' Rooftops Could Provide 5 GW Of Solar Capacity

27 April 2012 (Solar Inudstry)

"The city of Los Angeles has more than 12,000 acres of prime space for solar development on the rooftops of local homes, businesses and multifamily buildings, with the potential capacity to create as much as 5 GW of locally generated power, according to a study by the Los Angeles Business Council (LABC)…[A] solar-ready rooftop space…equivalent to nearly 20 square miles.

"The recent approval by the Los Angeles Department of Water and Power (LADWP) to move forward with the city's first feed-in-tariff (FIT) program - CLEAN LA Solar - provides the opportunity to create the first 150 MW of rooftop solar in the next three to four years, with a goal of reaching 600 MW by 2020."

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"An LABC-sponsored study by UCLA found that a 600 MW FIT could result in 18,000 green jobs, spur $2 billion in investment, and produce long-term cost savings for businesses, ratepayers and the LADWP…

"…[LA] must meet a state mandate requiring local utilities to generate 33% of their power from renewable sources by 2020. The solar FIT…[is expected] to help the utility meet that goal…in the limited time frame…"

SOLAR ON THE VERGE

Solar power’s next shining

Krister Aanesen, Stefan Heck, Dickon Pinner, April 2012 (McKinsey & Company)

“… Despite [a rush of new solar producers, including China, solar module oversupply, pressure on margins, demand exceeding supply, and governments scaling back solar support in the aftermath of the economic crisis], new McKinsey research indicates that the industry is suffering from growing pains rather than undergoing death throes. Solar is entering a period of maturation that, in just a few years, will probably lead to more stable and expansive growth for companies that can manage costs and innovate to tap rising demand from multiple customer segments.

“Solar power: Darkest before dawn finds that underlying PV costs are likely to continue to drop as manufacturing capacity doubles over the next three to five years…The cost of a typical commercial system could fall 40 percent by 2015 and an additional 30 percent by 2020, permitting companies to capture attractive margins while vigorously installing new capacity.”

“The research suggests that the overall solar market will continue to grow—even though subsidies are expected to dry up….[Growth over the next 20 years] will stem largely from demand based on viable stand-alone economics in five customer segments: off-grid, residential and commercial in areas with good and moderate sun conditions, isolated grids, peak capacity in growth markets, and new large-scale power plants…

“To succeed in this environment, companies should direct their attention to the relatively prosaic objective of reducing costs, without giving up on the imperative to innovate…Many companies can cut their costs dramatically by adopting approaches widely used in more mature industries to optimize areas such as procurement, supply chain management, and manufacturing—and therefore position themselves to capture attractive margins even as prices for PV modules fall…”

UK TO FLOAT WIND

UK Crown Estate to offer up deep water sites

James Quilter, 26 April 2012 (Windpower Monthly)

“The Crown Estate, which controls the UK's territorial waters…plans to open up test sites in deeper waters in the North Sea… as part of the UK's study into lowering the cost of energy for offshore wind.

“The move would mean the development of floating platforms, which are being trialled by companies including Siemens and Statoil (Hywind), and Vestas and EDP (WindFloat).”

“It comes as the US and UK signed a deal…to co-operate on the development of floating platforms for wind turbines. “In October,the UK's Energy Technologies Institute (ETI) earmarked £25 million (€28.7 million) for an offshore floating-turbine pilot. It is seeking more funding from other partners before the project launches in 2016…The ETI plans to design, construct and install the pilot at a relatively near-shore site with wind speeds of up to 10m/s at 60- to 100-metre water depth…”

JAPAN TESTS SMART GRID

Japan Picks Eight Tsunami-battered Regions for Smart City Projects

Jay Alabaster, April 18, 2012 (IDG News via PC World)

”The Japanese government will provide assistance to eight cities that were heavily damaged in last year's earthquake and tsunami to rebuild using ‘smart city’ technologies that use IT to cut dependence on traditional power sources.

“The Ministry of Economy, Trade and Industry…will provide a total of ¥8.6 billion (US$100 million) for coastal cities in Fukushima, Miyagi and Iwate Prefectures along Japan's northeastern coast. The cities, which teamed up with major domestic companies like Fujitsu, Toyota and Toshiba to apply for the project, now have until September to submit final proposals for projects that are up and running by March 2016.”

“Japan is investing heavily in infrastructure projects that seek to use advanced networking technology along with power grids to efficiently track and control electricity use. Such infrastructure, which includes Internet-connected power meters in homes, and giant electricity "routers" that control where power is sent, is considered a key building block before alternative energy sources like solar panels and wind turbines can be used on a large scale.

“…The island country has few natural resources of its own and has increasingly relied on nuclear power until last year's magnitude-9.0 earthquake and resulting tsunamis caused meltdowns at a key nuclear plant. Since then nearly all of the country's nuclear power reactors have been shut down for safety checks and many local communities are against starting them up again, leading to government-mandated blackouts…”

NEW ENERGY FOR DEVELOPING WORLD FARMERS

Five Renewable Sources of Energy for Farmers in Developing Countries

Isaac Hopkins and Jenny Beth Dyess, April 17, 2012 ()

“…Many of the world’s poorest people are rural farmers with no connections to power grids or large-scale energy sources. Most of their day-to-day energy currently comes from the burning of wood and charcoal, practices that contribute to air pollution, deforestation, and the loss of precious time and energy collecting firewood…[but] five sources of renewable energy…are [also]…allowing them to improve their harvests and their lives.

“1. Solar Energy: …The Solar Electric Light Fund (SELF) is a non-profit organization that is working in more than 20 countries to install…an innovative drip-irrigation system in Benin that is powered by photovoltaics…Solar Household Energy, Inc. (SHE) provides rural farmers, often women, with solar cookers, called HotPots, and the training to use them effectively…One project in Chad decreased household wood usage by up to 40 percent in only two months.”

“2. Wind Energy: …The organization Practical Action…helped villages in Sri Lanka install a wind turbine that provides electricity for the entire community…Villagers pooled their resources to install and manage the turbine…and as a result a number of steady jobs are created. Installing a local turbine also means people no longer have to travel long distances and pay large amounts to recharge batteries that they regularly use.

“3. Biogas: …[With the] International Fund for Agricultural Development…Farmers in Fada, a village in China’s Guangxi province, each built their own plants to channel waste from household toilets and nearby shelters for animals into a sealed tank. As the waste ferments, gas is captured and used in cooking. Forests are being protected because pressure for firewood has been reduced, saving 56,000 tons of firewood per year. Over five years, area farmers increased tea production from 400 to 2,500 kilograms a day and average income in the village quadrupled to more than $1 per day…4. Micro Hydropower…5. Biomass Briquettes…”

Colbert’s Solution For Climate Change

Colbert has found out who the people are causing climate change, even though he doesn’t believe in it and doesn’t think it’s manmade. And he has a solution. From ComedyCentral

Climate Change And New Energy On The Farm

If, in the previous video, Colbert’s reasoning seems flawed, how about wind, solar and biogas? Because “you can’t stop cows from burping and farting.” From Elroque79 via YouTube

The Real Answer To Climate Change

If, in the preceding videos, Colbert’s answer doesn’t sound right and farming seems too smelly, how about this? From PBS via YouTube

THE UNGREEN PRESIDENTIAL CANDIDATE

Candidate Romney’s Energy Plan; Romney accuses the Obama administration of having an “unhealthy obsession with green jobs.” Here’s the Romney platform.

Eric Wesoff, April 26, 2012 (Greentech Media)

[Among the inaccuracies in the Romney platform, Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth:] “As the Obama administration wages war against oil and coal, it has been spending billions of dollars on alternative energy forms and touting its creation of “green” jobs. But it seems to be operating more on faith than on fact-based economic calculation. To begin with, wind and solar power, two of the most ballyhooed forms of alternative fuel, remain sharply uncompetitive on their own with conventional resources such as oil and natural gas in most applications. Indeed, at current prices, these technologies make little sense for the consuming public but great sense only for the companies reaping profits from taxpayer subsidies.”

“Romney accuses the Obama administration of having an "unhealthy obsession with green jobs” and cites [discredited] studies which show that green jobs might actually hurt employment rather than help it…”

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75,000 jobs is an unhealthy obsession?

[Among the inaccuracies in the Romney platform, Believe in America: Mitt Romney’s Plan for Jobs and Economic Growth:] “As president, Mitt Romney will make every effort to safeguard the environment, but he will be mindful at every step of also protecting the jobs of American workers. This will require putting conservative principles into action…The first step will be a rational and streamlined approach to regulation, which would facilitate rapid progress in the development of our domestic reserves of oil and natural gas and allow for further investment in nuclear power…The United States is blessed with a cornucopia of carbon-based energy resources. Developing them has been a pathway to prosperity for the nation in the past and offers similar promise for the future…”

“Romney does not support cap-and-trade or the Kyoto Treaty. Romney's viewpoint on global warming, according to a spokesperson: ‘He believes it’s occurring, and that human activity contributes to it, but he doesn’t know to what extent.’”

SMART MONEY GETS IN THE WIND

More sophisticated investors looking to buy wind assets in 2012

Abby Gruen, April 18, 2012 (SNL Financial)

“…Strategic investors, including Everpower Wind Holdings Inc., MidAmerican Renewables LLC, GE Energy Financial Services, Atlantic Power Corp. and Algonquin Power Co., have access to the capital markets and bank markets, and are buying more developed properties than in years past…It is expected to be a tougher market than ever for developers to get power purchase agreements, and for those who lack committed buyers for their projects' energy, there will be more pressure to partner with larger players to get their deals done…

“…Investors are looking for near-term buildable assets, compared to a number of years ago when they were looking for development pipelines, because many strategic investors have platforms they want to add assets to…Investor-owned utilities in particular are buying a growing share of installed wind capacity and their nonregulated affiliates will continue to make acquisitions, even as the market slows at year-end…Given the capital intensive nature of the business there are more joint ventures and partnerships in financings…”

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“The tax equity market grew 25%, with more than $6 billion raised in 2011…[M]ore than half of tax equity investors elected to use the PTC, over the cash grant, or investment tax credit…Capacity factors weigh in more now because the towers are taller and the blades longer, so they have greater capacity, so the PTC over time could be a better choice…

“Everpower Wind is a subsidiary of Terra Firma Capital Partners Ltd. MidAmerican Renewables is a subsidiary of Berkshire Hathaway Inc. GE Financial Services is a subsidiary of General Electric Co. Algonquin Power is a subsidiary of Algonquin Power & Utilities Corp. BlackRock Alternative Investors is an investor platform for BlackRock Inc. and NTR plc. JP Morgan Capital Corp. is a subsidiary of JPMorgan Chase & Co.”

THE COST OF EV OWNERSHIP

Alternative Fuel Vehicles Offer Fleet Operators Lower Total Cost of Ownership, Hedge against Future Fuel Price Shocks

April 17, 2012 (Pike Research)

“Many fleet managers in North America and Europe are facing increasing pressures to “green” their fleet operations…[and] budgetary pressures are driving fleet operators to look at new ways to reduce costs, including by cutting fuel consumption and maintenance. One way to achieve these goals is by switching from conventional gasoline or diesel vehicles to alternative fuels and propulsion systems…

“Fleet operators have a wide range of alternative vehicle options…including battery electric, hybrid electric, plug-in hybrid, fuel cell, compressed natural gas (CNG), and other models, all of which offer different emissions, operational, and cost characteristics. While these alternative fuel vehicles carry an up-front cost premium (and can require additional infrastructure investments), the total cost of ownership (TCO) over the lifetime of the vehicle can be lower than conventional internal combustion engine vehicles.”

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“According to a new report from Pike Research, the lowest alternative fuel option for fleet operators in the United States is the battery electric vehicle [BEV], assuming that the operator is able to claim the $7,500 federal tax credit…[BEVs] will have a lower TCO over a vehicle lifespan of 120,000 miles, but not at mileage levels that are well under that..With $3.50 per-gallon gasoline, alternative fuel vehicles will provide payback in fleets that do a lot of driving. As gas prices continue to rise over $4, the equation will tilt further toward options like hybrids and plug-ins…

“Pike Research’s TCO analysis also reveals the benefits of moving to a smaller vehicle, no matter the fuel type. The lowest TCO vehicles are the compact options, whether hybrid, gasoline, or compressed natural gas (CNG). The compact BEV and hybrid electric vehicle (HEV) models have lower TCOs than the small gasoline model, while the plug-in hybrid, mid-size HEV, diesel and CNG all have lower TCO than the mid-sized gasoline sedan. By comparison, flex-fuel and stop-start vehicles are unlikely to pay off their higher sticker prices…”

A HOLE IN THE U.S. GRID

US Grid Has $107B in Investment “Gaps” by 2020; The American Society of Civil Engineers finds that failing to spend on grid upgrades will end up costing U.S. homes and businesses nearly $200 billion by 2020.

Jeff St. John, April 26, 2012 (Greentech Media)

“…[Failure to Act from the American Society of Civil Engineers (ASCE)] finds a gap of $107 billion dollars between today’s trends on grid investment and what the country needs to invest between now and 2020…If U.S. utilities and regulators don’t work to increase spending trends to make up that gap, the result will be…aging equipment and capacity bottlenecks that lead to…electricity interruptions…Those may come as equipment failures, voltage surges and power quality irregularities, or blackouts and brownouts due to demand exceeding supply…

“ASCE’s estimates of current 2012 costs to such grid problems are about $6 billion for U.S. households and $10 billion for U.S. businesses. But by 2020, they add up to $71 billion for households and $126 billion for businesses…[T]hat $197 billion in costs is nearly twice as much as the $107 billion in investment needed to fix the problem…”

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“…The Electric Power Research Institute (EPRI) predicted last summer that smart grid investment of $338 billion to $476 billion could yield $2 trillion in benefits by 2030, but that failing to invest could cause power prices to quadruple …Without needed investment in the grid, U.S. GDP will fall by a total of $496 billion by 2020, the U.S. economy will end up with an average of 529,000 fewer jobs…and personal income will fall by a total of $656 billion…ASCE’s estimates are actually lower than many…from [older] studies…The massive Northeast blackout of 2005 led to a spurt of new investment in grid reliability, which has mitigated some of the most pressing grid reliability problems…

“…ASCE’s report breaks out a gap of $12.3 billion in power generation, $37.3 billion in transmission lines and $57.4 billion in distribution grid systems through 2020. In other words, the distribution grid -- the neighborhood power delivery system -- will require more investment than generation and transmission combined…[T]he Southeastern U.S. has the most catching up to do…followed by [t]he Western U.S…the Mid-Atlantic…and Texas…”

TODAY’S STUDY: ALL THE NUMBERS ON WIND’S 2011

AWEA U.S. Wind Industry Annual Market Report; Year Ending 2011

April 12, 2012 (American Wind Energy Association)

Introduction

U.S. wind power installations took a pronounced upturn in 2011, and the year’s final numbers tell a multi-faceted story. Wind energy is now firmly established as a mainstream energy source, with a growing domestic manufacturing supply chain and ever-improving technology that has made U.S. wind power more competitive than ever.

Technological innovations and growing a domestic supply chain are pushing wind energy further down the cost curve. In addition to its other unique benefits, wind energy has zero fuel costs and locked-in electricity prices for decades.

The U.S. industry’s continued march forward, evidenced by over $13 billion in investment in 2011, is particularly impressive given the short-term policy uncertainty under which the industry is currently operating.

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In 2011 the wind industry installed 3,464 wind turbines across 96 wind projects for a total of 6,816 megawatts (MW) deployed in the U.S.

Despite challenges associated with policy uncertainty, a recovering economy, weak power demand, low electricity prices and dipping natural gas prices, the wind industry saw a 30 percent increase in new installations compared to the 5,214 MW installed in 2010.

Megawatts added in 2011 put total U.S. wind installations at 46,916 MW, a 17 percent increase that keeps the industry in the double digits for overall annual growth. Now at 2.9 percent of the overall U.S. generation mix as of 2011, and meeting over 10 percent of the electricity demand in five states, electricity from wind power capacity in the U.S. can supply the equivalent of the electricity used by over 12 million American homes.

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Wind power comprised 31 percent of all new generating capacity deployed in 2011, second only to new natural gas. That contribution marks a continuation of a lasting trend, as wind has installed 35 percent of all new capacity over the past five years.

Even with wind energy’s impressive growth rate here, which has now lasted years, America has barely begun to tap its wind resource. The country’s wind resource is as diverse as it is great, with the 10 million MW of wind potential in the U.S. spread uniquely across the country. The most active states in 2011 for most megawatts of new installations were California, Illinois, Iowa, Minnesota, and Oklahoma. While some long-time staple states in the wind industry installed the largest number of megawatts, states seeing the largest growth rates in 2011 tell a different story: Ohio, Vermont, Massachusetts, Michigan, and Idaho all more than doubled or nearly doubled their installed wind capacity in 2011 alone. And Kansas is setting the stage for a strong 2012 with the most new capacity under construction of any state in the U.S.

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The evolution of wind energy technology is evident just in turbines’ nameplate capacities. The average turbine size, after years of steady increases, jumped further in 2011 to nearly 2.0 megawatts (MW) in 2011, up from 1.77 MW in 2010 and 1.48 MW in 2005. A closer look at those turbines reveals characteristics that have been critical factors in another industry trend: wind power’s ability to access new regions and markets. Tower heights and rotor diameters (wingspan of the blades) are rapidly increasing, allowing developers to access better winds and capture more energy in areas previously not considered to have ideal wind resources. While the average hub height is 81 meters, hubs rising to 100 meters-plus—a threshold reached only in recent years—already comprises 5 percent of all turbines installed during 2011.

The top end of turbine rotor diameters also demonstrates wind’s continued progress; rotor diameters for turbines installed during 2011 averaged 92 meters, while over 55 percent of turbines installed have rotor diameters of 90 meters or greater, and nearly 23 percent of turbines are at 100 meters or greater.

This technological evolution is directly related to the advancing domestic turbine market and an increasingly made-in-the-U.S.A. wind manufacturing supply chain. The turbine market saw continued diversification, with 23 active turbine manufacturers installing 31 turbines with different ratings during 2011, up from only 5 turbine manufacturers in 2005.

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The U.S. wind supply chain that supports these turbine manufacturers already has a strong foothold in the U.S.: over 470 wind related manufacturing facilities, representing 30,000 wind manufacturing jobs, are now spread across the country. The growing manufacturing capacity here is reflected in the increasing domestic content of turbines, with 60 percent of U.S.-deployed turbines’ value being manufactured domestically in recent years (2009-2010), up from less than 25 percent prior to 2005.

As wind energy slides down the cost curve and provides a stable-priced product for electricity consumers, electric utilities continue to show increasing interest in including wind energy as part of their power portfolio. One example: When utility Xcel Energy secured a wind power purchase in 2011, in approving the contract, the Colorado Public Utilities Commission stated that “the contract will save ratepayers $100 million on a net-present-value basis over its 25-year term under a base-case natural gas price scenario” while providing the opportunity to “lock in” a price for 25 years.

In 2011, electric utilities signed at least 39 new long-term power purchase agreements (PPAs) for wind energy. Direct ownership of wind projects by utilities, meanwhile, increased in 2011 to reach 25 percent of all new wind capacity, up from 15 percent in recent years. Between new PPAs and direct ownership of wind power by electric utilities, 79 percent of all new wind capacity in 2011 was secured by some form of long-term power off take.

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As electric utilities expand their use of wind power, the transmission grid is also expanding. Progress was made in 2011, with new transmission lines being completed and revised rules helping expedite the process of integrating wind into the power grid. In coming years, several new transmission lines are planned that will be able to carry more than 44,600 MW of new wind power.

The U.S. wind power industry’s greatest challenge for 2012 is one with which the industry has lived for some time: short-term, unstable policy. The federal Production Tax Credit (PTC), a performance-based tax credit for kilowatt-hours produced by a wind farm once it is built, has typically been extended in only one- and two-year increments. The history of the PTC proves its effectiveness as a driver of billions of dollars of investment in the U.S., in the form of both project development across rural America, and a growing manufacturing sector for wind turbine components.

Stable policy—in the realm of what other energy sources have received for 90 years or more—would send the proper market signal that would allow U.S wind power to flourish to an even greater extent.

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While federal policy uncertainty still holds back the U.S. industry, other stable policy drivers remain in place. State targets for renewable energy continue to drive wind installations in many areas of the country.

As many as 29 states have renewables requirements, and still more states have renewables goals. California leads the way in this area; in 2011, the governor of California signed into law legislation that increases the state’s renewable electricity standard from an already strong 20 percent to an historic 33 percent by 2020.

The industry closed out last year with numbers that suggest a strong 2012, with 8,300 MW of wind power under construction as the year began. Meantime, with wind power now established as a mainstream energy source, the U.S. industry is ready and able to continue boosting the economy with investments in new projects across rural America, and greater demand for the supply chain that will expand this bright spot in America’s manufacturing sector even more.

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U.S. Wind Power Capacity Growth in 2011

The wind industry installed 6,816 MW in the U.S. in 2011, over a 30 percent increase over the new wind capacity installed in 2010. The wind power capacity added in 2011 represents a solid 17 percent growth in total U.S. wind installations, which now stand at 46,916 megawatts (MW).

The industry’s average annual growth for the past five years is now 33 percent. Equally impressive: electricity generated from wind power capacity in 2011 in the U.S. can supply the equivalent of over 12 million American homes.

Driving the growth of any industry is the customer; in wind power’s case, that customer is the electric utility. Tellingly, the number of signed wind power purchase agreements was up in 2011, with an increasing number of utilities being attracted to (and publicly acknowledging) the benefits of the wind power. Unlike other forms of generation, wind power comes with affordable, guaranteed prices for a period of timing spanning decades. Wind power is immune to fuel price volatility, providing stability and risk protection within utilities’ portfolios; more than ever utilities are drawn to wind power because of these attributes.

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Because wind power is affordable and secure, 2011 saw PPAs being signed all over the country, even in regions where those unfamiliar with wind power might have assumed the clean, affordable energy source would be less likely to be used. In 2011, Alabama Power, a subsidiary of The Southern Company, made its first wind power purchase.

In signing off on the contract, the Alabama Public Service Commission noted that the “price of energy from the wind facility is expected to be lower than the cost the company would incur to produce that energy from its own resource […] with the resulting energy savings flowing directly to the Company’s customers.” And in Colorado, in a late-2011 order approving a wind power purchase by Xcel Energy, the state Public Utilities Commission stated that “the contract will save ratepayers $100 million on a net-present-value basis over its 25-year term under a base-case natural gas price scenario” while providing the opportunity to “lock in a price for 25 years.”

To understand the scope of wind power’s growth and the achievements made by the maturing, now-mainstream industry during the last few years, it’s useful to look back and consider wind power’s growth numbers from when it was a mere emerging technology. It took nearly 25 years for the industry to reach 5,000 MW of capacity, from the early 1980s to 2003 (6,226 MW at the end of that year).

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That’s when wind power truly took off. After 2003, U.S. wind installations doubled in just three years, with the industry celebrating the milestone of exceeding 10,000 MW in 2006.

From there, the industry showed that it had only begun to ramp up. Within a mere two years, installations had doubled again, to 20,000-plus MW by 2008 and then, remarkably, two years later installations doubled still again, with 40,000 MW online by 2010. In just a few short years, wind power had become a major player on the energy landscape. In 2011, with another year of solid installation numbers under its belt, the industry further cemented itself as a primary contributor to the mix for newly installed electric capacity, accounting for 31 percent of all new generating capacity in 2011.

The U.S. wind power industry installed 3,446 MW in the fourth quarter, representing over 60 percent of total 2011 installations. The fourth quarter performance slightly exceeded the installations in the same period in 2010, and outpaced the first three quarters of 2011 combined. Strong fourth quarters are typical in the wind industry for reasons that include seasonal weather (i.e., developers want to finish projects before winter), the general business cycle and, in many years, impending expirations of the federal wind tax credit at the end of a given year.

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New wind power capacity continues to make up a large share of all new generation in the U.S., second only to natural gas. The natural gas industry installed nearly 42 percent of the year’s new electric generating capacity while wind power followed at roughly 31 percent, up from 26 percent in 2010.

Over the past five years, between 2007 and 2011, wind installed roughly 35 percent of all new generation capacity in the U.S.

All renewable capacity (wind, solar, biomass geothermal, and hydropower) combined for roughly 39 percent of all new generating capacity installed during 2011, similar to the amount of new natural gas added during the year.

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The new capacity numbers reveal that wind continues to be a mainstream player in the nation’s energy sector, given that it provided nearly a third of the new installed capacity even during a year characterized by strong market competition across energy sources, a recovering economy, and continued low natural gas prices. In 2011, the wind industry continued to see electric utilities sign long-term contracts for wind power, thanks to the stable and known terms such contracts provide, with 39 new power purchase agreements signed in 2011 alone by 30 different electric utilities…

Global Wind Power Capacity Growth in 2011…U.S. Wind Power Activity by State & Region…Owners & Developers of U.S. Wind Power Capacity…U.S. Utilities with Wind Capacity on Electric System…Characteristics of U.S. Wind Projects…U.S. Wind Power Project Financing Activities…Wind Turbine Manufacturing…U.S. Wind- Related Manufacturing Facilities…Benefits of Wind Energy…U.S. Wind Industry Employment…Types of Institutions Offering Wind Energy Programs…Wind’s Impact on Emissions…Wind’s Impact on Avoiding Water Consumption…Wind Power & Transmission…U.S. Offshore Project Activity…Distributed Wind Activity…

QUICK NEWS, April 26: SOLAR SHAKEOUT; WIND GETTING BIGGER; BIG COMPUTING GOES GREEN

SOLAR SHAKEOUT Surviving The Shakeout: With PV Stocks Plunging, Where Are We Headed?

Jessica Lillian, 24 April 2012 (Solar Industry)

“…[T]hin-film PV manufacturer First Solar…[anounced it] would cut 2,000 jobs and shut down its manufacturing operations in Germany …[and] the company's stock hit an all-time low as analysts questioned its core business model in an era of low polysilicon prices…[M]ost analysis indicates that First Solar's woes are representative of a broader corporate-finance trend in the solar sector. While many companies will survive and emerge as more competitive players, the worst may be yet to come for others.

“During the first quarter of 2012 (Q1'12)…[the] Lincoln International [solar index] declined by 4%, underperforming the S&P 500 index…Two of the four solar segments studied - cells and modules, and vertically integrated firms - posted quarter-over-quarter declines. Stock performance for manufacturers of cells and modules slid the most, decreasing 6.5% quarter-over-quarter, while the index for vertically integrated manufacturers declined 0.8%...Only the wafers/ingots segment and the engineering, procurement and construction (EPC) contractor and developer segment measured increases…[But] relatively few EPC providers and project developers factor into solar stock trends…”

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“…Lincoln International's index ranks ReneSola, China Sunergy, Solar Power Inc. and Akeena Solar Inc. as the best performers in their respective industry segments. LDK Solar, Solon, SolarWorld and Premier Power fared the worst in Q1'12…Lincoln International's solar index declined less in Q1'12 than in the three previous quarters. The worst drop came in Q3'11, when the index plunged more than 50%...[and Lincoln International predicted that companies] closer to the actual solar projects and to the end purchasers of solar projects should weather the current difficulties better than the manufacturers…

“…[C]ould First Solar be one of those survivors? The company's project-development plays have expanded in recent years as it has sought to diversify its market activities…At the same time, however, First Solar - like many other PV manufacturers that have bulked up their project-development pipelines in recent years - focuses on utility-scale projects…[and] this segment comes with its own set of vulnerabilities, and less exposure may enable a solar firm to be better positioned…”

WIND GETTING BIGGER Goldwind developing 10MW wind turbine

James Quilter, 25 April 2012 (Windpower Monthly)

“Goldwind is working on a 10MW turbine according to its annual report for 2011…Technically, this makes Goldwind the second manufacturer to be working on a 10MW turbine. Last year Sinovel also said it was developing one although it is believed this was largely based on AMSC's SeaTitan design.

“Goldwind's plan follows guidelines set out in China’s five-year economic plan for 2011 to 2015 published last year. The government has already set out its intention of prioritising the development of 3MW to 5MW onshore and 5MW to 10MW offshore wind turbines.”

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“Additionally, Goldwind looks to be moving away from direct drive. The company is believed to be testing a medium-speed model fitted with a locally made gearbox, a system described as ‘half direct drive’…[because] it would be more profitable for Goldwind to sell the expensive rare earths directly at the market…

“Earlier this year, Goldwind said it was also set to unveil a 6MW prototype by the end of 1H. It has been working on the design, with German subsidiary Vensys, since 2010.”

BIG COMPUTING GOES GREEN Energy Efficient Technologies and Practices Could Limit Total Data Center Greenhouse Gas Emissions by 13% Through 2016

April 25, 2012 (Pike Research)

“…[T]he demand for data center capacity continues to rise. The rapid adoption of IT use in the emerging economies is also providing a powerful engine for the growth of data center capacity…[All this] is further increasing these facilities’ energy footprint. Today’s data center industry consumes around 1.5%% of the world’s energy. Data center operators are struggling to keep energy demand in check while continuing to grow their capacity…

“…The need to reduce energy consumption is being driven by a diverse set of factors that includes the rising price of electricity, greenhouse gas emissions, information technology improvements, cloud computing, virtualization, large advances in cooling techniques, and significant improvements in monitoring and management tool suites.”

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“According to a new report from Pike Research, the widespread adoption of energy efficient data center technologies and best practices could significantly limit the growth of emissions of greenhouse gases (GHGs) from data centers…If current trends continue, GHG emissions from data centers are expected to total 1326 million tons of carbon dioxide-equivalent; green data center best practices could reduce that total to 1156 tons, a difference of 13% …

“Pike Research forecasts that the green data center will offer an annual market opportunity that exceeds $45 billion worldwide by 2016. The Asia Pacific region is projected to have the highest revenue growth through 2016, with a compound annual growth rate (CAGR) of just under 30% between 2011 and 2016. Double-digit revenue growth is also projected for Europe and North America (CAGRs of almost 27% for both markets)…”

TODAY’S STUDY: CARBON MARKETS ON HOLD

Carbon 2012; A Market Waiting for Godot

Carina Heimdal, Emil Dimantchev, Hongliang Chai, Emilie Mazzacurati, Anders Nordeng, Ingvild Sørhus, Natalia Yakymenko and Elizabeth Zelljadt., 21 March 2012 (Point Carbon)

EXECUTIVE SUMMARY

This year’s survey shows that in the EU ETS, the low carbon prices lead to emission reductions in fewer of the companies covered by the scheme and that the carbon price is a less decisive factor in investment decisions than previously. This underpins the need for political action, either through a deepening of the EU wide emission reduction target or through a reduction in the amount of allowances distributed to EU ETS companies. These issues are at the centre of discussions in the European Parliament, among member states and in the European Commission. This will be the main policy issue to drive carbon prices in Europe this year.

The assessments of the EU ETS cost-effectiveness and maturity show a stabilisation – this is also likely related to the current low price levels, as well as to thefts from registries in early 2011 and to the changes to the scheme which will kick in next year, when the programme enters phase 3. Forty-seven percent of respondents think the EU ETS is the most cost-efficient way to reduce emissions, and thirty-seven percent agree with the statement that the EU ETS is a mature market.

The EU ETS continues to be seen as more cost-effective and mature than the CDM. For instance, 36 percent of respondents think the largest Kyoto flexible mechanism is the most cost-effective way to reduce emissions in developing countries. Assessments of the CDM are more positive than last year, and this is 5 percentage points up from the 2011 survey.

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As much as 28 percent agrees that the CDM market is mature – up from 19 percent last year. We think that the more positive assessments of the CDM come from more efficient project registration and issuance by the UNFCCC, greater use of standardised baselines and default values, and more frequent use of stakeholder consultations by the CDM Executive Board.

On a more negative note, the outlook for CDM investments and trading of CERs is gloomy. Much higher shares than last year plan to decrease or completely stop investing in CDM projects, trading primary and secondary CERs. These results are not surprising in a context of a bearish price outlook and poor outlook for demand for credits towards 2020. The results also show that the EU ETS restrictions on international offsets in phase 3 are starting to bit on investment plans.

In North America, of the respondents voicing an opinion, more thought that regulators will tighten the Regional Greenhouse Gas Initiative’s cap in the coming years than did not. However, even more respondents didn’t know or had no opinion on whether the cap will tighten, reflecting the state of uncertainty around the future of RGGI’s current over-allocation.

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In California, emitters prepare for the cap-and-trade scheme starting in 2013 mainly through preparations for allowance and credit purchases. A large majority of emitters in California participating in the survey have no plans to move production out of the state due to carbon costs. However, one fifth of respondents covered by the upcoming cap-and-trade scheme in the Golden State are considering to do so.

Nearly 70 percent of respondents in Australia think the national carbon scheme will go ahead as planned, while a quarter think it won’t. This may reflect concern over threats from the opposition to dismantle the scheme if they win the elections in 2013. We think that the “flexible price” period of the carbon scheme will start as planned on 1 July 2015, but there may be changes to the price floor and ceiling.

Moving to the international scene, respondents were somewhat more dissatisfied with the outcome in Durban than in Cancun. Nearly forty percent of respondents think the global policy framework after 2020 will be a pledge-and-review system. Under such an international set up, countries pledge emission reduction targets reflecting decisions at national level, and the UN Convention on Climate Change merely gathers these pledges and coordinates reporting of emissions - without a Kyoto like compliance regime. Meanwhile, thirty-four percent of respondents think there will internationally binding targets for major emitters post- 2020. Finally, 18 percent think that countries will fail to agree.

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FOREWORD As the California Air Resources Board (CARB) completes the final preparations for distribution of CO2 allowances to the State’s largest industries, including an auction of about 10% of the allowances in the first compliance period under a broad cap and trade regulation, opponents of climate action are converging on Sacramento. Some object to having to buy allowances; others want to eliminate or expand the ability to use offsets; a few even question the need for action, citing continued challenges to the science of climate change or the perceived unfairness to California residents of placing a price on carbon when other states and countries are doing nothing.

In the face of a new round of well-funded efforts to overturn the program, renewed efforts are underway to educate policymakers, businesses and consumers about what to expect and why cap and trade makes sense. This is no easy task. While most voters understand that climate change is a real threat, and many are willing to support action, few people can explain cap and trade and even fewer believe it’s the best way to reduce greenhouse gas emissions. So how do we go about building and maintaining the support necessary to carry us through the start-up of this new venture?

First and foremost, we are working on our own and with our partners in the Western Climate Initiative to make sure that when the (imaginary) bell rings for opening day there are no administrative glitches. We have carefully studied the experience of RGGI and the EU ETS, both good and bad, as well as the cautionary tale of California’ disastrous experiment with deregulating electricity markets. Every aspect of allowance creation, tracking and use has been designed to deter fraud. We are retaining an independent market monitor whose job is to be on constant lookout for any symptoms of irregularity or problems in the trading of allowances that might be symptoms of abuse or market manipulation. A blue-ribbon market oversight committee will review and advise if action needs to be taken to correct problems.

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Our goal, of course, is to launch a system that runs smoothly, that achieves the stipulated reductions in greenhouse gas emissions at a cost that is acceptable to the general public and that fits well within a set of policies designed to encourage investment in energy efficiency, renewable electricity generation, and rapid adoption of advanced technology vehicles and fuels.

Looking ahead, I see three major areas where we will need the help of creative business and financial thinkers.

1. Compliance-grade offsets. The demand for fully verified offsets developed under approved CARB protocols will grow quickly. The Board is eager to find offset types that fit our rigorous criteria. While there are no current plans to relax the geographic boundaries or numerical limits on offsets, these aspects will be under close scrutiny and may be revised if need be.

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2. Voluntary offsets. As forward-looking businesses and state and local permitting agencies with responsibility for environmental impact review and mitigation begin to incorporate assessment of GHG emissions in all kinds of plans, project developers will need to find and lock in emissions reductions. Such offsets will be required both by law and public scrutiny to demonstrate that they are real, enforceable and exceed any current or likely future regulatory requirements.

3. Investment. Making sure that the benefits of free allowances and the proceeds of auctions are used wisely is emerging as a major political issue. Without losing the benefit of a price signal to those who can choose to reduce GHG emissions cost-effectively while at the same time protecting the general public against rate shocks requires careful calibration. For the public sector, the temptation to seize any new revenue to fill general budget holes may be irresistible. Any diversion of proceeds from the cap and trade program to non-AB32 purposes risks a judicial stop to the rule. But there are ample opportunities to think creatively about using the robust new revenue stream that will start flowing when transportation fuels and natural gas come under the cap in 2015.

By then, we are hopeful that an improving economy and increased public awareness of the visible impacts of climate change will combine to give politicians in other states and regions the encouragement to move forward with their own climate plans. Following the lead of Gov. Edmund G. Brown Jr., who is constantly spreading the good news about the benefits of investing in California’s clean energy economy, there are indications that other leaders may be willing to re-engage in the climate debate. When they do, we will be ready with the case studies to show that using market instruments can play an important role in solving the global climate crisis…Mary D. Nichols…Chairman, California Air Resources Board

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INTRODUCTION

We are already well into the last year of the EU ETS’ phase 2 and of the first Kyoto commitment period as this report is published. In the EU ETS, the largest carbon market segment, we expect increased market activity this year. Compliance entities optimise their portfolio as the end of phase 2 approaches, while utilities gear up hedging activity in anticipation of the need to purchase all allowances in the market from 2013. The discussion around a possible intervention in the EU ETS through a withdrawal of allowances from the market is heating up. In North America, Quebec and California work on the launch of their markets, planned for 2013.

In this report, we present the results of our seventh annual Carbon Market Survey, which aims to gather the views of carbon market participants and observers across the globe. We have asked questions related to market participants’ behavior and expectations, tailoring questions based on each respondent’s market involvement. We cover the EU ETS, CDM, JI, New Zealand ETS, California and Quebec markets, emerging carbon markets in Asia and Australia, as well as international negotiations.

Some 3 149 respondents answered this year’s survey, roughly 600 more than last year. The survey ran from 6 to 26 February 2012, and responses were garnered through a web based tool.

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Among the respondents, around half were involved in trading of various compliance carbon allowances and credits, or owned such instruments. Looking at carbon market roles, the largest subset comprises consultants/ advisors (see Figure 1), while the second largest group was CDM project developers or investors (receiving CERs). Companies regulated by the EU ETS represented the third largest group. Twelve percent of the respondents were not directly involved in the carbon market.

Looking at geographical origin, the US is again the home of the largest share of respondents, with 14 percent of the total. The next countries are the UK (10 percent), India (6 percent), Germany (5percent), Australia (5 percent), China (4 percent), Canada (4 percent) and Norway (2 percent).

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It should be noted that this survey is conducted among individuals that are significantly more than average interested in carbon markets and policy.

Participation is voluntary, and we expect that those most interested in the topic will to a larger extent respond than others. The sampling is thus not representative of the larger population. All interpretations of the survey’s results – which are sometimes surprising – should therefore be read bearing in mind that the sample may be subject to a bias in favor of carbon. Furthermore, inference to general public opinion should be avoided…

QUICK NEWS, April 25: THE BACKING FOR NEW ENERGY; UTILTIES STILL BUYING WIND; SOLAR MAKERS INVESTING IN THE FUTURE

THE BACKING FOR NEW ENERGY Clean-energy subsidies are vanishing. What should replace them?

Brad Plumner, April 18, 2012 (Washington Post)

"Clean tech has…benefited from billions of dollars in subsidies from Congress, through various energy and stimulus bills. As a result, many industries…have taken lengthy strides…But…[Beyond Boom & Bust from the Brookings Institution, the Breakthrough Institute, and the World Resources Institute shows that]…clean-energy subsidies are disappearing fast, as the stimulus winds down and various laws and tax credits expire. Back in 2009, clean tech got $44.3 billion in federal support. By 2014, that will have shrunk to just $11.1 billion…

"The new report…is the first to examine in detail which policies are actually expiring and when. All told, Congress has created more than 92 different programs dealing with clean tech — everything from production tax credits for wind power to advanced manufacturing credits to loan guarantees for nuclear power…And, by 2014, 70 percent of these programs will have vanished."

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"The authors argue that letting all of these programs expire could cause the clean tech sector to ‘go bust,’ as budding energy technologies like solar, wind, and even next-generation nuclear plants are currently facing pressure from ultra-cheap natural gas and from subsidized competitors in China…[T]hat doesn’t mean all 92 of these programs should simply be extended as is. For one, that likely won’t fly politically…it’s not good policy on the merits to keep forking money over to solar and wind and geothermal producers without a real sense of larger aims…

"[T]he report suggests that Congress should rejigger its clean-energy subsidies in several ways. First, it should focus heavily on research and development. And second, the subsidies that are geared toward deploying new technologies — the credits and policies that help wind turbines sprout up and nuclear reactors get built — should be structured so that they reward improvements in performance…[Feed-in tariffs] for wind and solar power that get smaller over time…[force] the technology to keep improving in order to stay profitable…The ultimate goal of these policies…is to push clean tech so that it can eventually stand on its own and compete with older, more established fossil fuels…"

UTILTIES STILL BUYING WIND Two utilities take different paths to the top in wind; MidAmerican Energy is building vast wind farms. Xcel Energy has mostly purchased its wind power.

David Shaffer, March 31, 2012 (Minneapolis Star-Tribune)

"Xcel Energy Inc… has the most wind power on its system of any U.S. electric utility…MidAmerican Energy Co…[is] the top utility in wind generation ownership…two distinct business approaches to harnessing wind power…MidAmerican owns almost all of its wind generation. Xcel…purchases much of its renewable power under long-term contracts from wind farm developers.

"There are pros and cons to each approach, as utilities weigh whether to tie up capital in wind technology or let others take the risks…Together, Xcel and MidAmerican Energy have a 17 percent share of the nation's wind power capacity…Most utilities have gone Xcel's way…[because] the companies didn't have any experience with wind power, especially in the 1990s, and turned to companies specializing in the technology…"

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"…[But] 2011 saw a major shift. For the first time, 23 percent of new wind capacity was utility-owned last year, up from a more typical 15 percent to 18 percent…It's too early to know if that was just a blip. But…some utilities want to own wind farms so they can get a return on their investment, rather than simply passing the cost of purchased power through to customers…MidAmerican Energy Holdings…[will] own 75 percent of their wind generation -- compared with 7 percent for Xcel…

"…[The ownership, risk-management] strategy is to take advantage of the federal production tax credit…and carefully manage wind power with the rest of the company's generation…The risk of future greenhouse gas regulation is another argument for owning, rather than purchasing, wind power…[But] wind power prices have been dropping. When Xcel faces the expiration of its first wind power purchase contracts in 2018, it's possible the utility could get a better deal on its next long-term contracts…[and] wind farms also will eventually need to be upgraded…But for a few years, after projects are paid off, wind farm owners could face only operation and maintenance costs…"

SOLAR MAKERS INVESTING IN THE FUTURE Spending on PV Equipment to Bottom of Cycle in Q2’12; Strong Growth Forecast from 2013 – 2016; Meyer Burger, GT Advanced Technologies Gaining Due to Strong Backlog

April 16, 2012 (Solarbuzz)

"Equipment spending by tier 1 PV manufacturers is poised to resume in 2013 with strong double-digit annual growth rates forecast out to 2016, according to new research…[from NPD Solarbuzz]… This upturn in capacity expansion is being stimulated by the PV manufacturing shakeout, as uncompetitive production lines are either being idled, retired or removed following corporate failures…

"PV equipment revenues (covering c-Si ingot-to-module and thin-film) for Q1’12 fell to $1.75 billion, a 10-quarter low, down 27% Q/Q and 51% Y/Y. However, the CapEx downturn is forecast to finally bottom-out during Q2’12, following six consecutive quarters of negative growth."

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"The rebound in spending will be characterized first by new order intake driven by a select group of tier 1 manufacturers. Positive Q/Q growth in new orders will emerge in 2H’12, as capacity expansion plans are revised to address market-share aspirations for 2013 and beyond. This will be reflected in PV book-to-bill ratios that will return above parity during 2H’12.

"The severity of the cyclic spending downturn is having a dramatic impact on PV equipment suppliers in 2012. Most leading equipment suppliers are now projected to see Y/Y PV-specific revenue declines in the 60-80% range…Suppliers that already serve market segments adjacent to PV (semi, display, and LED) have experience in how to manage capital equipment spending cyclicality, so they will be best positioned to cope with the PV downturn during 2012. However, equipment suppliers that had aligned their core business activities to focus mainly on the PV industry will be particularly affected, with further workforce adjustments and negative operating margins likely…"