U.S. wind installations slump below China, Germany, India

Source: Benjamin Hulac, E&E reporter • Posted: Wednesday, August 20, 2014

Despite anemic installation figures in 2013, political uncertainty about the extension of renewable energy tax incentives and competition from low-cost natural gas — as well as other renewables — the U.S. wind energy industry remains set to bounce back in the next two fiscal years, according to a Department of Energy technology report released yesterday.

The U.S. wind sector added merely 1,087 megawatts of new capacity in 2013, a 92 plunge from 2012 installation figures, but remained the second-largest wind market based on cumulative electrical capacity with 61 total gigawatts.

China, the country with the largest installed wind energy capacity, was also the most active wind energy investor in 2013, adding 16,088 MW to increase its cumulative capacity to 91 GW.

Builders installed 36 GW of new capacity worldwide — and the United States ranked sixth in new installations for 2013, behind China, Germany, India, the United Kingdom and Canada — increasing global capacity to 321 GW.

International market saturation is an interesting point of comparison. Through 2013, Denmark generated 34 percent of its power from wind and Spain, Portugal and Ireland generated about 20 percent of their energy demands through wind power, according to the report. American wind turbines’ capacity can satisfy an estimated 4.5 percent of power demands in an average year, the report said.

“Wind power is paving the way to a low-carbon future that protects our air and water while providing affordable, renewable electricity to American families and businesses,” said Energy Secretary Ernest Moniz in a statement. “However, the continued success of the U.S. wind industry highlights the importance of policies like the Production Tax Credit that provide a solid framework for America to lead the world in clean energy innovation while also keeping wind manufacturing and jobs in the U.S.”

Small turbine makers see ‘a lot of growth’

Alice Orrell of Pacific Northwest National Laboratory, a government research group in Washington state, said she was not surprised 2013 was a down year for the wind sector.

Citing competition large wind turbine projects faced from other energy options, like the burgeoning domestic market for natural gas, as well as other renewables, Orrell said small wind turbines — 100-kilowatt capacities and lower — made up a larger portion of the market in 2013.

But, Orrell explained, slow domestic business pushed manufacturers to look for profits overseas, pointing to the United Kingdom and Italy as venues where manufacturers of small turbines enjoyed some success last fiscal year.

“There was a jump in exports,” said Orrell, who was one of the primary authors on a second report, which focused on the “distributed” wind market, about U.S. wind power in 2013. “U.S. small wind turbine manufacturers are seeing a lot of growth.”

Some of the European success came from feed-in tariffs, policy mechanisms that allow eligible projects a fixed price from their local utility for the power they generate. Orrell said, overall, the U.S. wind industry is vulnerable to volatility in state funding levels.

Wind projects, particularly large ones, are “very site specific,” she added, explaining that large wind farms need open spaces and, of course, a steady wind supply.

While Orrell and her colleagues are still “digging through the trends,” she said wind capacity installed in the first two quarters of 2014 has surpassed, or soon will, the total capacity added in 2013.

“So far, we know that there will be more distributed wind,” she said. “It’s on track to exceed 2013.”

While incentives like the production tax credit, or PTC, and the investment tax credit, or ITC, which can be applied to fund wind, solar, biomass, geothermal and other renewable energy projects, hold significant sway over the U.S. wind energy industry; the ITC is set to expire on the last day of 2016 unless Congress intervenes, and the PTC expired at the end of 2013.

“Allowing [the PTC] to expire, as is scheduled to occur at the end of this year, will move us away from further diversification of our energy portfolio, take away opportunities for consumers to save money, dampen domestic manufacturing and innovation, and cause companies to hold off on investing in communities across America,” said Rob Gramlich of the American Wind Energy Association, a trade organization that advocates wind power, before a House subcommittee in October 2013.

Costs drop, but investors remain skeptical

Financing for wind projects “held steady” in 2013, according to the DOE technology report.

“Financing activity is likely to pick up in 2014 based on the number of projects with signed power purchase agreements that will need to achieve commercial operations in 2014” in order to meet the PTC criteria, the authors predicted.

Cost also decreased in 2013, according to the report, as average installed project costs came to $1,630 per kilowatt, down $300 per kilowatt from reported average costs in 2012.

Alluding to U.S. EPA’s Clean Power Plan to cut coal emissions, the technology report’s authors suggested it may drive investment in new wind energy markets.

Yet in financial markets, investor outlook might be described as skeptical at best.

“Inaccurate forecasts of project capacity factors will dog the wind power industry for the near term and could result in overleveraged wind power projects,” the Fitch rating agency warned in a report in May. “In the short run, the demonstrated difficulty with accurately predicting wind power project output will continue to create risk for bondholders.”