TODAY’S STUDY: THE 2013 U.S. DISTRIBUTED WIND MARKET

2013 Distributed Wind Market Report

AC Orrell, HE Rhoads-Weaver, et al, August 2014 (Pacific Northwest National Laboratory/U.S. Department of Energy)

Executive Summary

In 2013, 30.4 megawatts (MW) of new distributed wind capacity was added, representing nearly 2,700 units across 36 states, Puerto Rico, and the U.S. Virgin Islands (USVI). Since 2003, nearly 72,000 wind turbines have been deployed in distributed applications across all 50 states, Puerto Rico, and the USVI, totaling 842 MW in cumulative capacity. The 83% decline from 2012 to 2013 of distributed wind capacity additions is in line with the 92% decline from 2012 to 2013 in overall U.S. wind capacity deployed.

To compensate for weaker domestic sales, U.S. small wind turbine manufacturers shifted their focus to growing international markets. Exports from U.S.-based small wind turbine manufacturers increased 70% from 8 MW in 2012 to 13.6 MW in 2013. U.S. small wind turbines were exported to more than 50 countries in 2013, with top export markets identified as Italy, UK, Germany, Greece, China, Japan, Korea, Mexico, and Nigeria. In 2013, 76% of U.S. manufacturers’ new small wind sales capacity went to non-U.S. markets, a substantial increase from 57% in 2012.

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The purpose of this report is to quantify and summarize the 2013 U.S. distributed wind market to help plan and guide future investments and decisions by industry, utilities, state and federal agencies, and other interested parties. Distributed wind is defined in terms of technology application based on a wind project’s location relative to end-use and power-distribution infrastructure, rather than on turbine or project size. While the distributed wind market includes wind turbines and projects of many sizes, this report breaks the market into two segments when appropriate: wind turbines up through 100 kW (in nominal capacity) referred to in this report as “small wind,” and wind turbines greater than 100 kW used in distributed applications.

Residential applications accounted for 40% of U.S. distributed wind deployed in 2013, followed by agricultural for 26%, industrial and commercial for 20%, and government and institutional for 14% on a per project basis. Off-grid small wind turbine models continue to account for the bulk of wind turbine units deployed in U.S. distributed wind applications, but wind turbines connected to the distribution grid, or “grid-tied” applications, accounted for more than 97% of the annual domestic distributed wind capacity (in terms of MW). U.S. suppliers continued to dominate the domestic market for small wind, claiming 93% of 2013 domestic small wind sales on a unit basis. On a capacity basis, U.S. suppliers claimed 88% of 2013 domestic small wind capacity, up from 86% in 2012. The 2013 combined U.S. market for new and refurbished small wind turbines accounted for $36 million in investment from nearly 2,700 units sold; however, this represented a 70% decline in capacity from 18.4 MW in 2012 (3,700 units and $101 million in investment) to 5.6 MW in 2013.

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Reported 2013 U.S. distributed wind deployments of all sizes encompassed 69 different wind turbine models ranging from 100 watts (W) to 2 MW from 38 suppliers with a U.S. sales presence. Eight of the top ten models of all 2013 wind turbines deployed in U.S. distributed applications (on a unit basis) were manufactured by suppliers headquartered in the United States.

Of the 30.4 MW of distributed wind capacity deployed in 2013, nearly 82% (24.8 MW) is from 9 projects using turbines greater than 100 kW, for a total of 18 units, in Colorado, Kansas, Ohio, Massachusetts, Alaska, Indiana, North Dakota, and Puerto Rico. Nevada, Iowa, Minnesota, Oklahoma, New York, Texas, and Hawaii led the nation for 2013 small wind sales. Texas, Minnesota, and Iowa retained their positions as the top three states with the most distributed wind capacity deployed since 2003. Iowa, Nevada and California remained the leading states for cumulative small wind capacity. A total of 14 states now have more than 10 MW each of distributed wind capacity.

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A total of $15.4 million in federal, state, and utility incentives were awarded to distributed wind projects in 2013, but significant imbalances between solar and distributed wind incentive funding levels exist in several states. This total amount contrasts strongly to 2012 during which over $100 million in such incentives were awarded. With respect to the discrepancy between solar PV and distributed wind funding at the state level, New Jersey provides a strong example with $363 million of awards to solar PV projects compared to $6 million to distributed wind projects since 2003.

The capacity-weighted average installed cost of newly manufactured 2013 small wind turbines sold in the United States was $6,940/kW. However, due to substantial differences in the costs of various wind turbine models as well as tower types and heights, foundation requirements, local installation labor, and other issues, installed costs range widely.

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Installed cost and wind turbine energy production (i.e., capacity factor) drive a wind project’s levelized cost of energy (LCOE). In general, the higher the capacity factor, the lower the LCOE. The amount of annual energy production that can be achieved by a distributed wind project is driven by many variables, primarily the project’s available wind resource and siting (e.g., tower height, local obstructions, and other micro-siting issues). The capacity-weighted average capacity factor for a selected group of distributed wind projects installed between 2006-2013 analyzed for this report is 15%, and their capacity-weighted average LCOE is 14¢/kWh.

The U.S. distributed wind energy supply chain is comprised of hundreds of manufacturing facilities and vendors spread across at least 34 states, with at least 31 facilities actively assembling, manufacturing, or refurbishing wind turbines used in distributed applications; at least 17 facilities manufacturing wind turbine blades and other composites; at least 12 facilities producing wind turbine towers; at least 10 facilities producing drive trains and other electrical components; dozens manufacturing wind turbine mechanical components; and numerous other facilities involved in the manufacturing supply chain (e.g., materials and construction equipment suppliers, financiers, and insurance and other service providers).

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Installed distributed wind capacity is expected to be higher in 2014. Although new capacity additions of all applications of wind turbines were down in 2013, the American Wind Energy Association (AWEA) reported that over 12,000 MW of wind capacity were under construction at the end of 2013 and up to 130 MW of that may be considered distributed wind.

From an industry perspective, distributed wind stakeholders generally agreed that 2013 was a difficult year for the domestic market and that exports “saved the day” for many small wind turbine manufacturers. Most stakeholders interviewed for this report indicated, however, that the next two years should be better, but not dramatically due to barriers such as state incentive programs for distributed wind remaining stalled or lethargic; the expiration of important federal incentives such the ITC for turbines greater than 100 kW, the U.S. Treasury 1603 Program, and bonus depreciation; and the advantages in many applications of solar PV (i.e., better financing, lower prices, easier siting, and technology-specific incentives). However, positive notes include stable funding for U.S. Department of Agriculture Rural Energy for America Program, which will have mandatory funding of $50 million per year for 2014 through 2018, additional wind turbine certifications in process, and new financing models.

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Certification bodies continue to provide wind turbine buyers with reliable third-party verification of important safety, acoustic, and performance data and to provide wind turbine sellers the capacity to demonstrate compliance with regulatory and incentive program requirements. Certified ratings are allowing purchasers to directly compare products, and helping funding agencies and utilities gain greater confidence that small and medium turbines installed with public assistance have been tested for safety, function, performance, and durability and comply with standards. As of July 2014, 13 small wind turbine models are fully certified to AWEA Standard 9.1 – 2009, 2 medium wind turbine models have published power performance and acoustics certifications to IEC 61400-12-1 (power) and IEC 61400-11 (acoustics), 8 small and medium wind turbine models have limited or conditional certifications, and more than 20 additional wind turbine models have conducted testing or are pending applications.

Building on the success of third-party financing options for solar photovoltaics, several leading distributed wind industry members are now offering long-term leases, with guaranteed performance, warranties, maintenance, and insurance. These dramatically reduce up-front costs to customers. These products address key distributed wind economic and risk barriers including resource uncertainty, site-assessment costs, performance uncertainty, operational maintenance and reliability risks, and the high initial cost of installations. They are also designed to leverage state and federal incentives, site wind resources, and customer interests. Distributed wind industry leaders see innovation in third-party financing as key to maintaining small wind’s competitiveness and are eager to expand its reach.

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