The Winds of Change
There are 20,000 jobs in Wind according to reports by the American Wind Energy Association (AWEA) as of 2010. These are people employed directly and indirectly in wind turbine manufacturing. Compare this to 2,500 in 2004, i.e. an eight-fold increase. There are additionally 55,000 U.S. workers employed in other parts of the wind industry such as construction and services.
The size of the U.S. wind turbine market has grown from approximately $2.7 billion in 2005 to $12.5 billion in 2009 (463%). And 2010 demonstrated unprecedented growth with the installation of nearly 3,000 new wind turbines, almost half of the number as installed in the 5 preceding years. By the end of last year the U.S. had over 35,600 wind turbines installed domestically.
Capacity in the U.S. has been expanded via U.S. and foreign companies who assemble and produce wind turbines and components. There were almost 400 U.S. manufacturing facilities produced wind turbines and components in 2010, up from as few as 30 in 2004. The turbine manufacturers’ supply chains are global, but the U.S. has garnered an estimated 50-60% share of parts manufactured due to recent investments; that share was only 25% in 2005. In 1984, there were only 300 MW of installed wind projects around the world. But by the end of this year, there will be over 240,000 MW.
Cost of Wind
Bloomberg New Energy Finance (BNEF) analyzed the cost curve for wind projects since the mid-1980s and found that the cost of wind-generated electricity has decreased by 14% with each doubling of installation capacity. It is estimated that the average cost will come down another 12% by 2016. Costs have been reduced by improved manufacturing, better quality materials, larger turbines, and greater plant operation and maintenance experience. Additionally, there is an oversupply of turbines on the global market according to BNEF. When you add all these in to the mix, further downward cost pressure could bring parity between wind and conventional energy sources.
Like most energy technologies, wind energy, is subsidized through government incentives. One of the main federal policy tools to encourage renewable energy investment and production is a tax credit, known as the production tax credit (PTC). Wind, solar, geothermal, and “closed-loop” bioenergy companies are eligible for a Production Tax Credit. The PTC provides a 2.2-cent per kilowatt-hour (kWh) benefit for the first ten years of a renewable energy facility’s operation.
According to the Environmental Law Institute, from 2002 to 2008, the U.S. Government subsidies for fossil fuels were $70.2 billion ($53.9b in tax breaks and $16.3b in direct spending). That adds up to 63% of the subsidies for Fossil Fuels, Corn Ethanol, Renewable Energy, and Carbon Capture & Storage combined. Renewable Energy benefited from only 12% of these subsidies.
Both wind production and U.S. equipment manufacturing have been encouraged by a variety of federal laws and policies. Some of these policies are subject to change at the end of 2011, and others, such as the PTC, are scheduled to expire in 2012. The PTC for incremental hydro, wave and tidal energy, geothermal, MSW, and bioenergy was extended until the end of 2013.
The U.S. wind turbine manufacturing future is largely dependent upon federal and state policies. Short term extensions of the PTC are insufficient for sustaining the long-term growth of renewable energy. The best way to quickly drive investment in wind, foster innovation in technology and therefore in cost reductions, is to have consistent, supportive, and long-term policy.
BNEF reports that the best wind farms in the world are already competitive with coal, gas and nuclear plants. They predict that continued performance improvements and cost reductions over the next half decade should level the average onshore wind plant costs with cheap natural gas, and in the best locations with other fossil fuels.
BNEF highlights the importance of a deployment-based strategy in scaling renewable energy. It is normal that new energy technology may take decades to be brought into cost-parity with incumbents.
Justin Wu of BNEF says that: “In the next few years the mainstream world is going to wake up to wind cheaper than gas, and rooftop solar power cheaper than daytime electricity. Add in the same sort of deep long-term price drops for power storage, demand management, LED lighting and so on – and we are clearly talking about a whole new game.”
Redfish Technology Recommended Further Reading:
U.S. Wind Turbine Manufacturing: Federal Support for an Emerging Industry – Congressional Research Service