US Wind Power industry Continues to Show Growth and Maturation

Implications: The annual US Department of Energy report on wind power spells out details on the American achievement of 5,329 megawatts (MW) of capacity in 2007, the largest increase of any one country, and placing the US ahead of Spain and behind Germany in the Number 2 slot.  The report, issued by Lawrence Berkeley Laboratories, shows which turbine manufacturers benefited the most, cost trends and an evolving diversification of the ways wind projects are owned and financed.  Hopefully, this report will encourage Congress and the Administration to continue supporting incentives past 2008, allowing for the new President to craft a more more strategic plan to continue this market growth.

Analysis: The US wind power industry continues to show growth and maturity in its record breaking 5,329 megawatts (MW) of capacity added in 2007.  This report was produced by Lawrence Berkeley Laboratories for the US Department of Energy.  The interesting question will be whether Congress and the President has the wisdom and will to extend the Production Tax Credit law beyond the end of 2008, enabling the new Administration to craft a more strategic approach.  Or, will US policy toward renewables continue to be attention deficit disordered, while the incumbent fossil and nuclear power industries waddle along on their tens of billions of dollars of annual subsidies.

Some of the highlights of the report are as follows:

- As of 2007, over 1% of US electricity is generated by wind power, going from 0.8% in 2006 to 1.2%.

- The 5,300-plus MW capacity addition represented 35% of new nameplate capacity growth in the US from all sources.  Factoring in capacity, this amount would reduce the effective delivery to somewhere in the 15-20% level of new capacity, depending on how base load and mid-range plants are classified.

- Xcel Energy has the largest wind capacity in its service territory of any utility (2,635 MW) and is the highest percentage of electricity generated by wind of any investor owned utility (IOU), at 9.3% of sales.

- GE Wind remains by far the largest turbine installer in the US, at 2,342 MW.  But despite more than doubling growth from 2006, its market share has slipped from 47 to 44%.  Other old line companies have seen their market share slip as well; Siemens from 23 to 16% and Vestas from 19 to 18%.  Gamesa has been the biggest beneficiary of market share growth, from 2% in 2006 to 11% in 2007. Mitsubishi went from 5% to 7% and Clipper made its debut in 2007 at 1%.  Suzlon remained at 4%.

- The growth in market turbine size sold in the US has begun to level off in 2007, averaging 1.65 MW from 1.6 MW in 2006.   While turbines larger than 2.5 MW exceeded a 1% share in 2007, the biggest jump has been in the 1.51-2.0 MW range.

- Ten major mergers and acquisitions were reported in 2007, down from 13 in 2006.

- Project ownership is still predominantly by independent power producers (IPP), but investor owned utility (IOU) ownership is becoming more prominent.

- Long term contracts to utilities are still dominant, but there is increasing interest in merchant and power marketing deals.

- Costs continue to trend upward for wind projects, driven mainly by higher turbine prices. Cumulative costs of wind power projects are at about $40 per megawatt hour (MWh).  However, due to overall electricity cost increases, wind power continues to remain competitive.

- While dropping slightly in 2007, wind power projects remain well over 30% capacity factor.