Project Development, Wind Power

Dissecting the U.S. Wind Market

Doing business in the U.S. wind market is a tumultuous affair. After a number of years of high growth, the wind industry is facing a down year, partly due to the lack of consistent policy. As wind professionals watch the space with uncertainty, it’s more important than ever to have a grasp on the many moving parts behind the market’s expansion and retraction.

Each year, the Lawrence Berkeley National Lab puts out a report on policy, financial trends, manufacturing capacity, equipment costs and technology performance in wind. The 2009 report, simply called “Wind Technologies Market Report,” highlights how the wind industry has adapted to the market swings from 2009 to 2010.

After last year’s record 10 GW of installed capacity, the industry will likely only put about 5-7 GW online in 2010. Developers are finding it difficult to secure power purchase agreements, manufacturers are questioning how much to expand in the U.S. and investors are being extremely picky in the projects they back.

Earlier this week, Bloomberg New Energy Finance reported that turbine prices had dropped 15% since 2008. The American Wind Energy Association also said that installations had fallen to 2007 levels, with capacity down 70% in Q2 of 2010 compared with Q2 of 2009.

But the news is not all bad. According to the report, even with the economic malaise and policy inertia, the fraction of wind equipment manufactured within the U.S. increased to 60%. AWEA is warning that number will stagnate or drop if long-term policy is not adopted, however.

Uncertainty seems to be the only constant in the wind industry. This comprehensive report from LBNL breaks down all the important factors that have guided the industry through a less-than-optimal economic and political landscape.

Here are some major findings from the report, according to a summation from the LBNL:

  • The U.S. is the second-fastest-growing wind market worldwide. After leading the world for the past four years, the U.S. lost its top-market status in 2009, being overtaken by China as the country with the fastest pace of new wind power additions. Nonetheless, despite earlier grim predictions due to the financial crisis, the U.S. market continued to expand in 2009 and shattered its 2008 record for new wind power additions.
  • Market growth is spurring manufacturing investments in the U.S. Wind turbine manufacturers with modern wind turbines installed in the United States now hail from not just the United States, Europe, and Japan, but also from India and, for the first time in 2009, China. Seven of the 10 wind turbine manufacturers with the largest share of the U.S. market in 2009 now have one or more manufacturing facilities operating in the United States, and two of the remaining three have announced plans to open facilities in the future.
  • A growing percentage of the equipment used in U.S. wind projects is domestically manufactured. Trade data show that the United States remained a large importer of wind turbine equipment in 2009, with $4.2 billion of imports, up from $2.5 billion in 2006, but down from $4.6 billion in 2007 and $5.4 billion in 2008. Wind power capacity growth has outpaced growth in imports in recent years, and a growing amount of the equipment used in wind power projects is therefore being sourced domestically as domestic and foreign companies seek to minimize transportation costs and currency risks by establishing local manufacturing capabilities.
  • Wind power project costs continued to increase into 2009, but reductions may be on the horizon. Installed wind power project costs in 2009 averaged $2,120/kW, up by 9 percent over the 2008 figure. There are expectations that costs will drop in the near future as past cost pressures ease and work their way through to average installed costs.
  • Wind project performance has improved over time but dropped off in 2009. The longer-term improvement in project performance has been driven in part by taller towers and larger rotors. The drop in 2009 is, in part, attributable to a relatively poor wind resource year in many parts of the country along with increasing amounts of wind power curtailment—particularly in Texas, where 17 percent of all potential wind energy generation was curtailed in 2009 because of transmission inadequacy.
  • Rising wind power prices and sharply lower wholesale prices make the near-term economics of wind energy more challenging. Although some of the cost pressures facing the industry in recent years have eased, 2009 was another year of rising average wind power prices. The average 2009 sales price from projects built in 2009 was roughly $61/MWh.

For a detailed breakdown of these findings, read the whole report here.