Investing in Wind Energy: When Will Growth Peak?

Wind power generating capacity has been growing quickly in the U.S. In 2007, wind capacity grew by 46%, adding 16 million megawatt-hours of electricity to our annual production. The wind turbines were manufactured by seven companies.

Company	Megawatts of Capacity Installed in 2007
GE Wind (GE)	2,342
Vestas (VWDRY.PK)	948
Siemens (SI)	863
Gamesa (GCTAF.PK)	574
Mitsubishi (MHVYF.PK)	356
Suzlon (NSE: SUZLON.NS)	197
Clipper (CRPWF.PK)	47.5
Nordex (NRDXF.PK)	2.5

Source: DOE/AWEA

The Renewable Energy Production Tax Credit was extended for another year, being attached to the $700 billion bail-out bill that passed on October 3^rd. This assures that wind installation growth will be strong through 2009.

If the growth continues at the 2007 rate of 46% a year, installed wind, annual wind energy production will look like this, going forward:

Year	Electricity produced (terawatt-hours)
2006	32
2007	47
2008	69
2009	100
2010	146
2011	213
2012	311
2013	454
2014	664
2015	969
2016	1414
2017	2065
2018	3015
2019	4402
2020	6427

When will the growth peak? It depends on how wind energy will ultimately be used in the mix. Let's discuss a few possible scenarios.

First, the simplest scenario is the replacement of existing fossil fuel electricity generation, using the current grid. Studies show that about 20% of electrical generation can be replaced with wind without major alteration of our current grid. Since the United States uses about 4500 terawatt-hours of electricity per year, this amount would be 20% x 4500 = 900 terawatt-hours. In this case, we would reach the desired capacity around the year 2015, and installations could be expected to drop off after this.

If wind energy is used to power electric vehicles, and every gasoline car, truck, and SUV is replaced with a plug-in electric, then it will take about 1300 terawatt-hours of electricity to replace gasoline. Installed wind energy would reach this level around 2016.

If wind it is used to replace all uses of oil that can be replaced by electricity, it will take an estimated 1932 terawatt-hours. Installed wind energy would reach this level around 2017.

Last but not least, if technologies are developed that can store energy generated by wind, wind could generate all of the 4500 terawatt-hours per year that we currently use by about 2019.

Disclosure: No positions.

Comments

[Michael D.:]

Long on GE.

2008 Nov 09 10:23 AM

[Pipo:]

With oil prices this low alternative energy will suffer badly.

Boone Pickns is expecting some consolidation in the industry:

oiltradersblog.blogspo.../

2008 Nov 09 12:11 PM

[Joshua Lacey:]

OPEC will not allow the prices to remain low long. They cut 1.5 barrels per day production last month and are planning to cut more. It is amazing to me how easily we get sucked into a sense of peace with the gas prices. How soon we forget. The new adminstration has vowed to invest in alternative energy. I hope we as a nation have learned our lesson. It is time to move out of the dark ages and into the next era.

2008 Nov 09 01:31 PM

[SergeiD:]

Are the "Megawatts of Capacity Installed in 2007" numbers for US only or worldwide?

2008 Nov 09 02:14 PM

[Jeff Wilson_:]

This is for the U.S.

This is "nameplate capacity" meaning the maximum power the wind turbine can deliver in a windy day.

A typical wind farm can average about 30% of nameplate capacity. The most prime locations can come close to 50%.


On Nov 09 02:14 PM SergeiD wrote:

> Are the "Megawatts of Capacity Installed in 2007" numbers for US
> only or worldwide?

2008 Nov 09 03:29 PM

[Joshua Lacey:]

Financial Times Article Link To Share

IEA predicts oil price to rebound to $100 11/5/2008

www.ft.com/cms/s/0/ca2...

2008 Nov 09 04:04 PM

[MarvinMBA:]

Well it looks like GE got the market in energy going forward...wind, solar and Nuclear...this is the place to be going forward.

2008 Nov 09 08:21 PM

[CLH:]

Looking at wind, solar and nuclear, it seems that only nuclear makes any sense. Small reactors are already being produced by Hyperion. Without subsidies sun and wind will never be practical.

2008 Nov 09 09:18 PM

[carbonates:]

I'd like to see some calculations of how you think that growth rate of installations can be maintained. This seems to be Kool-Aid for the alternative energy sect and I don't agree with your math. Few business models or natural functions can grow in the manner you are suggesting.

Manufacturing of equipment, availability of capital, capacity of local and long distance power infrastructure, NIMBY problems that require months and years of public hearings, environmental hurdles such as Environmental Impact Statements (often requiring a year or more of preparation), leasing of land from landowners, building of roads, species impacts such as those on bats and birds (not to mention endangered species like Kangaroo Rats and Mojave Ground Squirrels), Federal leasing requirements, local and state government regulations and permits, time required for actual site research into wind patterns to justify economics of projects, time limitations on field and construction access caused by wildlife breeding periods (required by Federal regulations), lack of trained installation personnel who are willing to work 200 ft in the air, insurance and liability issues, transportation limits that restrict the size of equipment that can be moved in many areas, bad weather and myriad other problems are quite likely to limit the growth rate to a much smaller number and will eventually impose a maximum growth rate, probably long before 2016. As the overall annual growth increases, it is likely to be a smaller and smaller percentage of the year before leaving the total installed capacity to grow in a pattern resembling a natural log, rather than being exponential as you suggest. Dream on.

2008 Nov 09 11:31 PM

[john s. gordon:]

kaci - we didn't learn our lesson in 1974-80 and this suited the houston oil millionaires just fine.
> jack

2008 Nov 10 08:28 AM

[John Cordes:]

The alternative energy bill renewed credits for eight yearsk, not one.

2008 Nov 10 08:47 AM

[use less:]

Your article is overly optimistic for wind power. You are basing your calculations on nameplate ratings which are never achieved over time. These machines are loud, ugly and a detriment to human health and wildlife.
Clipper and Gamesa have had problems with gear boxes and blades. Clipper had to recall their entire 2007 production.
This technology isn't new, only bigger.
Transmission for the amount of wind power you suggest does not exist.
Get some facts before spewing the bogus claims of the wind industry.

2008 Nov 10 08:58 AM

[use less:]

The Production Tax Credit (PTC) for wind in the bailout bill was extended for one year. This is so the wind industry lobbyists will have to give contributions to congressmen every year when they come begging for renewal for another year. Crooks all.
No one would invest in this boondoggle without subsidies and tax credites. Enron scheme gone wild.
No fossil fuel generating plants anywhere have been shutdown as a result of installing wind turbines and no reduction of emissions will occur because wind must be backed up with baseload generation.
SCAM


On Nov 10 08:47 AM jcordes wrote:

> The alternative energy bill renewed credits for eight yearsk, not
> one.

2008 Nov 10 09:05 AM

[User 294972:]

I work in this industry and agree with an earlier comment that oil prices will dictate how competative alternative energy can be in the coming years. There is a good chance that if Obama passes any sort of energy bill, oil prices will fall to levels that make electricity generated from sources such as wind and solar uncompetative. We often look at studies that compare technologies like clean coal, solar, and wind with current oil/natural gas prices. With coal, a carbon-regulation system could help but the main driver will still be the price of fossil fuels.

With that said, there is a chance that in return for the assistance it provides to the Auto industry, the government will require US automakers to shift their focus to production of Hybrid and Electric vehicles. Wind, solar, and nuclear have more of a future in this type of scenario.

With regard to the statistics in this article, you only provide figures for the US. Global demand could certainly support addional growth. And when you figure that only 30% of the output you list will actually be realized, the number of wind turbines required to produce at the output listed will be significantly greater.

2008 Nov 10 10:19 AM

[NOWHEREMAN:]

I have heard of Pebble reactors, Thorium reactors, and heard part of a story over the weekend about small garage sized reactors. Is Hyperion involved in the latter?

2008 Nov 10 10:24 AM

[john s. gordon:]

the HTGR with pebble beds as heat source & helium as the working fluid has been around since the 1970's or earlier (further advanced in germany than in the usa) but a complete fuel cycle for it does not exist. perhaps this will change in future. in the meantime you can buy thorium-fueled reactors from AECL.
> jack

2008 Nov 10 10:34 AM

[Road Runner:]

I'm amazed by how clueless many of you posters are.

First, "low" oil prices (just 5 years ago oil was $27/barrel and now it is over $60, and that's "low") are temporary created by the oversold unwinding of speculation in the commodities markets, and the extremely slow world economy. Two years from now this recession will be a memory and oil will be at least $100/barrel. It has to be much higher because of increasing emerging market demand and the high cost of producing oil today. Saudi Arabia is one of the lower cost oil producers and it's cost is around $50/barrel. Getting oil out of the Gulf of Mexico is not cheap.

One of you said that solar and wind will always have to be subsidized. That’s totally wrong. Subsidies are needed now to increase production scale so the economies of scale can drive down costs. Plus, technical and production efficiencies are improving at a very fast pace. Wind will be at grid parity in just a few years, and solar will be there just a few years after that.

Also, nuclear is good, but it takes a massive up-front investment and many years to put on-line. Also, if the world adopted nuclear at the best case scenario, there would only be about 30 years of Uranium left in the world.

2008 Nov 10 10:41 AM

[nakedjaybird:]

Jeff - First, Carbonates is correct about the incremental growth of wind installations: 46%, 36%, 26%, etc., or the like, is realistic; a constant 46% is not.

Secondy, solar and biofuels (and other alternates) could surely make up the difference for your "corrected" wind projections.

Thirdly, you provided a disturbing number for replacing auto oil consumption: ~400 terawatthrs; only 10% of our current electrical energy consumption. How did you arrive at this number? And, did you consider that automobiles (internal combustion engines) waste 80% of the energy they burn?? IF YOUR NUMBER IS CORRECT, WHAT IN THE WORLD ARE WE WAITING FOR?

THE BETTER QUESTION IS, WHO SHOULD WE STRING UP FROM D.C. TO HOUSTON TO DETROIT?

2008 Nov 10 12:31 PM

[User 294972:]

Road Runner: If the world really adopted nuclear, the best case scenario is that we make the necessary up front investments so that in 30 years we have fusion reactors running on hydrogen. Nobody talks about fusion because the costs are higher and the time horizon is longer, but this is the be all end all solution. Too bad the best research in this area is being done in Europe.

2008 Nov 10 01:07 PM

[Road Runner:]

User 294972, Great! Bring on nuclear fusion. I have been waiting for it since I was an electrical engineering student in the early 80s. It was supposed to be here by now or at least in the early phases of production. It was going to be the ultimate energy source. I cry over the lack of funding it has been getting. Maybe another 25 years from now, we will finally have it. But, by then solar will have exploded. It will be cheap, and the overnight and cloudy day storage problem will be solved by water to hydrogen electrolysis, storage in carbon nanotubes, and fuel cell “burning” in our homes and cars.

2008 Nov 10 01:52 PM

[jack kreg:]

wind and solar have seen subsidy's for decades, I would like to see this growth table with another column for total annual subsidy's both federal and state. I know that even though we are bankrupt in the CA state gov, we spend big $$ on alternative energy, wind and solar.
Also, the idea that wind is path to oil independence is littered with how do we convert our transportation industry's to run on electricity?
Current use of foreign oil is concentrated in autos, trucks, rail, buses, air and ships. Can you imagine a battery powered ship, plane, truck, or rail car puller??get real!!

2008 Nov 10 02:05 PM

[searcher:]

Those projections are what happens when someone discovers the exponential function on their calculator. Acceleration of even a falling penny ceases and velocity holds steady at terminal value. Similarly, reality as posited by "carbonates" will impose itself. However, that velocity will be impressive, indeed, and investible.

2008 Nov 10 02:57 PM

[hpski:]

How does all this square with Germany's pioneering program of home & business based solar panel electrical generation, where "excess" power is mandated to be purchased by utility companies? Why can't we parrot this type of program? I used to live near the wind farms at the eastern end of the Banning Pass in CA - they're at least 25 years old and still producing - I'm aware of RFK Jr's assertion that there's a huge opportunity for wind generated power in certain sections of the U.S. It appears to me that wind & solar, when opportunistically, and in some cases, forcibly applied, can cut our fossil fuel consumption big-time. I will read Jeff's "Manhattan Project" book - I was babbling about tackling our energy needs / global warming problem vis-a-vis a "Manhattan Project" or JFK's "put a man on the moon in 10 years" commitment years ago. Let's hope RFK Jr. takes the helm of the EPA! (aka poking war criminal & ecological terrorist Cheney in the eye with a pointed stick) Forti et fideli nihil difficile!

2008 Nov 10 03:07 PM

[Road Runner:]

Sure, there have been subsidies since the 1970s for solar and wind. Details I don't know. But, there was little interest in the 80s and 90s to do serious investing in wind and solar because of cheap oil. (I know that wind and solar don't compete directly with oil, but there is a huge physiological and public opinion relationship).

Now in the new millennium, there is renewed interest because of high oil cost, national security, and global warming. The difference now is huge advancements in materials technology (carbon fiber for turbine blades, silicon processing for solar cells, etc.), electronics (high power switchable diodes for inverters, etc.), computing power (sophisticated modeling of turbine blades to capture the most power, etc.) Now, we can finally reach cost parity with these technologies if we only promote volume production via subsidies.

Please people. Don’t think we will never reach the goal of grid parity with wind and solar because it took us so long to get here.

2008 Nov 10 04:19 PM

[GeorgeMo:]

Wouldn't it be more accurate to estimate the demand for wind energy based on the available land area with suitable average wind speeds? Turbine farms are currently only economical in locations with class 3 average wind speeds, and there are a finite number of those.

If anyone is able to solve the vibration problems of rooftop turbines, we're likely to see a large commercial market. One of the interesting technologies is called "aeroelastatic flutter". The company that's developing this (Humdinger LLC) is pretty far off the radar. have you seen any other promising rooftop technologies?

2008 Nov 10 04:25 PM

[nakedjaybird:]

uSER294972 - The best place and maybe only place fusion should be used is on the sun (and we use the benefit of it - called SOLAR PV) - NOW!!!!.

You may not be aware of the magnet requirements for fusion and then of course there is a waste problem (many materials become irradiated and break down, requiring disposal of stuff topping maybe nuclear fission reprocessing waste).

2008 Nov 10 04:40 PM

[nakedjaybird:]

Jack Kreg - get real. Fully steel wheeled electric train pullers already exist (Switzerland). The US has removed many steel railed trolley systems from major cities which could be installed again as beltways and spokes. Currently, US rails are diesel-electric and ccould be fully electric or even biofuel-electric. As for the interstate higway trucks and cars, electrify the interstates and install electrified steel wheeled FERRIES for cargo, trucks, vehicles, and people. There, that's how you do it (eliminate oil in GROUND TRANSPORTATION!). As for air and water transportation, grow and use biofuels. WHAT'S THE PROBLEM??

2008 Nov 10 04:48 PM

[NOWHEREMAN:]

Clipper Windpower is building the World's Biggest: Called the Queen of England's Wind Tower. Its on her property, will look down on the Tower of London and the blades will be 2 football fields in lenght.

3 cheers for the Queen.

2008 Nov 11 12:27 AM

[Joyful Alte...:]

JSG, in that 74-80 time period, the much-maligned Jimmy Carter put solar panels on the White House roof. Then we had Morning in America for the last 28 years.

It's time to get to work again.

2008 Nov 11 03:01 AM

[frflyer:]

"In 2006, Earth Track estimated that the US oil and gas industry received $39 billion in federal energy subsidies, and the coal industry a further $8 billion."

May 17 07:53 PM

[frflyer:]

I cut off most of my comment by mistake.

CLH
"it seems that only nuclear makes any sense."

It will take 10 years, at least, to build any new nuclear power plants. In those ten years, we will have built 100 GW of wind and hundreds of gigawatts of PV solar and solar thermal. Not only are wind and solar two to three times faster to build, the electricity prices for wind and solar will be much cheaper than from new nuclear. Estimates for new nuclear power are 12-17 cents/kWh. Solar thermal is already at that price, and will be below 10 cents in about 4 years, and from 4-8 cents/kWh when the industry gets up to scale in ten years or less.

Subsidies? You must be kidding. Nuclear has received about $500 billion over the last 50 years. Oil and gas get $39 billion every year and coal gets $8 billion/ before the new subsidies in the recent economic bills.
Oil has been subsidized continuously since 1919.

There couldn't be a worse argument against renewable energy.

westcoastclimateequity...
Global Warming Solutions for Governments

"Behind fossil fuels’ global dominance lies the shocking fact that governments still subsidize them with tax-breaks and price supports, some dating back to World War I. The total global give-away to fossil fuels comes to more than $210 billion a year."

"In 2006, Earth Track estimated that the US oil and gas industry received $39 billion in federal energy subsidies, and the coal industry a further $8 billion."

May 17 07:54 PM

[WayneS:]

Please define subsidies. What you are alluding to is analogous to deductions that individuals take on their income tax form. Oil and Gas corporations would be paying over 100% corporate taxes if it were not for what you call subsidies. Actually they are. For every $10 billion that XOM makes, $50 billion is paid in taxes to you and me, we the people.

On May 17 07:53 PM frflyer wrote:

> "In 2006, Earth Track estimated that the US oil and gas industry
> received $39 billion in federal energy subsidies, and the coal industry
> a further $8 billion."

May 19 01:57 PM

[WayneS:]

Look at back issues of "Mother Earth News" from the 60' and 70's.

On Nov 10 04:25 PM GeorgeMo wrote:
>
> If anyone is able to solve the vibration problems of rooftop turbines,
> we're likely to see a large commercial market. . have
> you seen any other promising rooftop technologies?
>

May 22 12:27 PM