DOE study finds more jobs and lower costs, but trouble ahead

Source: Christa Marshall, E&E reporter • Posted: Thursday, August 18, 2016

The United States ranks second in the world for total wind power capacity but lags behind other countries like Turkey and Poland in terms of the national percentage of electricity generated from wind, according to a new federal report examining the U.S. industry’s cost, performance, employment and generation trends.

The annual “wind technologies market report” from the Department of Energy and Lawrence Berkeley National Laboratory finds that the U.S. wind industry installed almost 8.6 gigawatts of capacity in 2015, the largest of any electricity source. Nationally, 41 percent of new-electricity capacity last year came from wind. Globally, the United States ranked only behind China in terms of annual capacity additions.

New construction is likely to continue over the next five years with the extension of the production tax credit in Congress last year, DOE said.

The report also documents how new installations are changing the regional electricity mix and tracks job growth and dramatic declines in costs, partly helped by improved turbine efficiency. For example, more than 10 U.S. states now get at least 10 percent of their electricity from wind.

Wind sector employment hit a new high last year of 88,000 full-time workers. Power purchase agreements for wind power are near all-time low prices, helping keep the industry competitive amid low gas prices.

“Today’s low PPA prices have been enabled by the combination of higher capacity factors, declining costs and record-low interest rates,” the report states. Low turbine prices also were a factor. Technology advancements helped keep their costs down in recent years, despite larger turbine heights and rotor sizes. Since the late 1990s, the average turbine height increased by about 82 meters.

Mark Bolinger, a research scientist at the Lawrence Berkeley National Laboratory, said the DOE analysis differs from other wind industry reports by focusing more on costs, performance and PPAs.

There are challenges for the U.S. industry, though. The extended PTC will phase down in increments through 2020, leaving some policy uncertainty after that. Projections for 2021 to 2023 indicate a downturn as the “PTC progressively delivers less value to the sector.”

“Expectations for continued low natural gas prices, modest electricity demand growth, and lower near-term demand from state RPS [renewable portfolio standard] policies also put a damper on growth expectations, as do inadequate transmission infrastructure and competition from solar energy in certain regions of the country,” the report says. “At the same time, the potential for continued advancements and cost reductions enhance the prospects for longer-term growth, as does burgeoning corporate demand for wind energy and longer-term state RPS requirements.”

U.S. EPA’s Clean Power Plan could create new markets if it survives, DOE said.

The United States also remains reliant on imports for many of its components, while U.S. wind manufacturers continue to adjust after a rocky period of plant closures, according to the report.

“The wind industry’s domestic supply chain continues to deal with conflicting pressures: an upswing in near- to medium-term expected growth, but also strong international competitive pressures and possible reduced demand over time as the PTC is phased down,” DOE said. For that reason, expectations for “significant supply chain-expansion have become more pessimistic,” despite rapid growth in the U.S. wind manufacturing workforce last year, it said.

Separately, DOE and the Pacific Northwest National Laboratory released a reportanalyzing the U.S. distributed wind market, where turbines provide power directly to homes and businesses rather than tapping utility-scale wind farms.

About 28 megawatts of new distributed wind capacity came online last year through the installation of 1,713 turbines in 28 states. In the past 13 years, about 1 percent of all U.S. wind energy capacity consisted of distributed wind.

Ohio, Nebraska and Connecticut led the U.S. market. Industrial use is a driver, as companies like Whirlpool Corp. and Stafford County Flour Mills Co. Inc. tapped the resource last year.

The estimated energy costs from distributed wind hovered near 11 cents per kilowatt-hour last year, according to a DOE test, compared to typical residential electricity rates of about 9 to 21 cents.

However, new distributed wind declined after 2012 because of the loss of federal stimulus money. A “downward trend” in state and federal incentives, competition with low natural gas prices, and other renewables like solar also are pressuring the industry.

“Although distributed wind is not as widespread as distributed solar, new third-party financing options similar to the lease model that spurred growth in the residential solar market could also grow distributed wind,” said PNNL energy analyst Nik Foster, a report co-author.