The American wind power market saw 5115 MW installed in 2010 – barely half of 2009 – but has started 2011 with over 5.6 GW under construction. Total US wind capacity now stands at over 40 GW, according to the American Wind Energy Association (AWEA).
But with China now having overtaken the US with almost 42 GW installed, Renewable Energy Focus U.S. asks some of the top wind turbine manufacturers to look into the crystal ball towards the next two years.
GE, the largest player on the US wind market with around 50% market share, has kept its dominant position throughout the financial crisis. GE believes, however, that support mechanisms must be put firmly in place.
Melissa Rocker at the GE US Wind Communications team says: “There remains a need for strong US Federal policy that supports the deployment of renewable energy technologies, like China and Europe have, for the US to maintain its leadership…”
A lack of long-term policies and support is a common theme amongst wind turbine manufacturers on the US market.
The companies all forecast various degrees of growth for this market in 2011 and 2012, aided by the extension of the cash grant until the end of 2011.
REpower USA’s Managing Director, Steve Dayney, believes there will be growth in US wind until 2012, but that: “Beyond 2012, the future is uncertain, and will remain so until the future of Federal tax and energy policies is clarified.”
Juan Gutierrez, Head of Strategy and Business Development for Siemens’ Wind Power Americas business, adds: “2013 will be a challenging year if there are no Government incentives put in place, such as an extension of the production tax credit (PTC). Without a PTC in the US, we can expect a market half the size of the current one.”
For offshore wind, Vestas Offshore predicts little development until around 2015. Vestas Offshore General Sales Manager, North America, Scott Keating, says: “Other than possibly Cape Wind (which has some political and other hurdles to get over yet) we do not see construction beginning on any utility-scale offshore wind farms in the next two years. We are optimistic, however, that a small handful of utility-scale projects will move forward significantly, and that we might see more encouraging news on the environmental permitting, siting and financing front that will support a strong growth in the development pipeline of projects.”
A recurring worry is a lack of certainty around policy at a Federal level, and a patchwork of support and regulations at state level, risking a boom-bust market with no long-term stability. As Dayney puts it: “At the Federal level, the short-term duration of tax credits available for renewable energy generation does not create the sufficient long-term certainty many manufacturers require when assessing whether to make large capital investments in a given market. … Differing state-level requirements create inefficiencies and challenges for multi-state utilities.”
Nordex USA’s President and CEO, Ralf Sigrist, however, believes utilities must also take some responsibility in creating favorable market conditions: “What is lacking is a long-term strategy of utilities to support wind projects by offering long-term power purchase agreements for, or even themselves investing into, wind projects, in order to take advantage of the opportunity to hedge future electricity prices against the volatility of fossil fuels.” To support the utilities, Sigrist believes the Federal Government has to come into play with, for example, a Federal Renewable Electricity Standard (RES), a feed-in tariff, or even a public utility commissions requirement of “firm prices under power purchase agreements for up to 20 years, not only for renewable energy, but also for conventional energy generation.”
Gutierrez at Siemens also believes there are more ways support the market: “This can be achieved through incentives, such as the cash grant and the PTC, or through penalties, such as costs of emissions, or alternative compliance payments (when there are certain requirements for renewable energy production per state). Some of the current states’ Renewable Portfolio Standards are unclear on the definition of penalties and their compliance mechanisms.”
Again, offshore is in a slightly different position. Keating at Vestas Offshore, says: “While the recent extension of the ITC [investment tax credit] was favorable for the industry in the short-term, generally, it has had very little effect on the offshore side.
|“Beyond 2012, the future is uncertain, and will remain so until the future of Federal tax and energy policies is clarified.”|
|- Steve Dayney, REpower USA|
“We are extremely encouraged by the recent revamping of Federal agencies, including the creation of BOEMRE [Bureau of Ocean Energy Management, Regulation and Enforcement], which brought increased focus, led by a strong off - shore wind proponent in Ken Salazar,” Keating says, but adds that “there remains, however, a great deal of work to be done on the policy side in order to create the platform for the launch of a sustainable offshore wind industry.”
Gutierrez sums up the policy situation: “‘Two faces’ of policy exist: One that entices developers and utilities to make attractive investments in renewable energy, and another in political mandates which are demanded, and enforceable, by law. All [the] programs are needed to keep the US market in its fast-paced upswing, but a sense of urgency and long-term commitment by decision makers are the cornerstones to industry strength.”
Driving Down Cost
Although the three-blade horizontal wind turbine design has dominated the market for years, there is still room for innovations – to make wind turbines more efficient but also, most importantly, to bring down cost and thereby making wind an even more attractive option in the US power market.
Material choice and design are high on the list of what can be done to improve future wind turbines.
REpower’s Dayney says: “Advances in materials for electrical components, blades, and gearboxes will incrementally improve the performance of wind turbines over time.”
Nordex’ Sigrist believes solving grid and transmission issues could contribute to reducing the cost of wind power in the US: “Transmission capacity is certainly key in this context, since the Midwest and the Great Plains offer a vast wind potential that is currently untapped to a great degree because of the lack of sufficient transmission capacity. The wind speeds in these areas allow a generation cost that is the most competitive compared to all alternatives to wind.”
Sigrist also mentions the power-per-tower issue, something Siemens’ Gutierrez agrees with. As transmission line expansions unlock new wind areas, more low to medium wind sites can be developed. “In order to develop profitable wind projects at these sites, it is important to continue the evolution of advanced technologies that maximize the energy production at low wind speed conditions. This would mean turbines with larger rotor diameters and higher hub heights,” Gutierrez says.
It will also be important to further develop aspects such as wind forecasting, energy storage and smart control systems in order to achieve grid stability.
|“2013 will be a challenging year if there are no Government incentives put in place, such as an extension of the production tax credit (PTC).”|
|- Juan Gutierrez, Siemens|
Siemens, like many other wind companies, is looking at direct drive, which can increase efficiency at the same time as reducing the number of parts in the generator compared to a geared solution. This could lead to lower costs, according to Gutierrez: “With half the parts of a conventional geared wind turbine, and much less than half the number of moving parts, the new wind turbine is expected to increase profitability for customers.”
Jason Fredette, Managing Director Corporate Communications at American Superconductor (AMSC), adds: “In terms of drive trains, we are expecting that geared wind turbine systems will remain dominant for a good number of years to come, although direct drive systems are starting to show more promise onshore.”
Offshore wind development still has a way to go in terms of technological innovation, including “foundation design, installation techniques, turbine reliability and efficiency, along with operations and maintenance,” Vestas Offshore’s Keating points out.
As has been experienced with onshore wind, offshore wind could also improve its cost-balance through economies of scale. “The first projects are always the most expensive, as a learning curve is climbed and a supply chain established.”
As with most renewable energy projects, the upfront costs of wind power are high, and project finance can be a challenge. But despite the dip in the economy, the wind turbine manufacturers say feedback from potential investors is positive. “We are not really seeing project financing and support as a barrier to onshore wind installations,” REpower’s Dayney says.
However, “there is a gap between the market price utilities are willing to pay and the price a developer requires, given all the costs that go into a project.”
The issue of Federal policy-making arises again. As Nordex’ Sigrist points out: “The extension of the possibility to monetize on the investment tax credit directly through the Treasury, currently until the end of 2011, instead of involving additional tax investors, is certainly a very helpful approach. It allows a wind project to keep the tax benefits itself, without adding the costs of paying a return to tax investors, and building such tax investors into the legal framework of project financing for a wind project.”
|“Advances in materials for electrical components, blades, and gearboxes will incrementally improve the performance of wind turbines over time.”|
|- Steve Dayney, REpower USA|
In the offshore market, no projects have achieved construction-finance in the US as of yet. Vestas Offshore’s Keating says the challenges include the US economic situation, combined with the uncertainties around an emerging market. “The important factors in achieving financing for offshore wind are policy certainty, business-case certainty, and long-term power purchase agreements. … Cost of energy and ROI are the most important factors for a customer investing in offshore.”
Siemens’ Gutierrez adds: “The extension of the US Treasury cash grant diminishes some of the recent concerns regarding the sufficiency of available tax equity. For the US offshore market, in particular, we observe a great deal of interest, especially from institutions that have already been active in European offshore wind projects, and that have acquired experience in dealing with specific topics.”
The Important US Market
Despite a troublesome policy and support situation, the US is seen as an incredibly important market for these wind turbine manufacturers.
Siemens’ Gutierrez comments: “The US is a very important wind market for Siemens. In the last five years, the US market has represented more than 40% of Siemens’ global installations. With a five-year average growth rate of 39% and nearly 37 GW installed wind power capacity, the US is currently one of the top global wind markets in terms of installed capacity.”
Siemens already employs close to 1500 people in the US wind business and has installed 3.6 GW of wind turbines in the country.
Andreas Nauen, CEO of REpower, adds: “North America, meaning the USA and Canada, is one of the largest markets in the world and a core market for REpower. We aim at capturing a significant part of this market and want to become one of the top five suppliers by 2015.”
Sigrist hums to the same tune: “The US market for Nordex is one of our three geographical key markets which we expect to account for around 25% of our global business in the future and we have all the potential to achieve this.”
The situation is no different for Vestas Offshore. “The US market is extremely important to us and represents a strategic growth opportunity for offshore wind,” Keating says. “We look forward to increasing our investments and commitments as focus increases on this emerging market.”
AMSC, the only company in this survey not currently active on the US market, says: “The US wind power market is not a significant focus for us today, but we see good opportunities here in the longer term.”
Kari Williamson is the Assistant Editor at Renewable Energy Focus.
Renewable Energy Focus U.S., January/February 2011