U.S. Wind Market Faces Growth-Constrained 2010

by: SustainableBusiness

Following a record-breaking year of capacity additions in 2009--with 9.8 gigawatts (GW) of wind projects installed--the U.S. wind market finds itself confronting a growth constrained 2010 and a near-term market landscape wrought with increased competition, according to a new market study.

However, with the proliferation of favorable state and federal policies, the U.S. wind industry is on track to add more than 165 GW of new capacity through 2025, according to figures from IHS Emerging Energy Research.

The result is an expected total installed base of 200 GW.

The study forecasts anywhere from 6.3- 7.1 GW of wind could be installed in 2010, 40%-60% percent lower than 2009 installations.

“2010 marks the first time since 2004 that the U.S. wind industry will not surpass the previous year’s growth level. Despite unprecedented federal wind incentives, reverberations from the financial crisis continue to create a difficult near-term market landscape especially in light of continued energy policy uncertainty. However, the U.S. wind market is poised to emerge from this near-term uncertainty with a clearer path toward strong future growth,” IHS Senior Analyst Matthew Kaplan said.

The U.S. wind industry will represent U.S. $330 billion in investments between 2010 and 2025, with more than 90% stemming from onshore wind, according to the study’s projections. The Midwest, Great Plains and Rocky Mountain states will act as major wind export hubs to areas with large appetites for renewables, including California, the Mid-Atlantic and the South.

While the U.S. is closer than ever to tapping into its enormous offshore potential with the the expected completion of the Cape Wind project in 2013, offshore is expected to account for only 5% of total U.S. wind build in 2025.

“The unprecedented decline in power demand and electricity and natural gas prices has had a profound effect on utility willingness to ink power purchase agreements,” says Kaplan.

Despite large build years in 2009, leading independent power producers EDP Horizon [EDW.F] and NextEra Energy Resources (FPL-OLD) have slashed wind build expectations exemplifying near-term challenges.

As heightened transmission congestion and waning utility demand for wind have strained growth in traditional ‘wind hot spots’ including Texas, Minnesota and California, developers have been forced to prospect states with less prolific resources and more arduous development conditions.

“Transmission remains one of the greatest barriers to the development of U.S. wind projects. Coordinated national policies will be necessary to more efficiently link the U.S.’ vast wind resources to high-demand regions, however, even with enabling policies, there will be a lag of several years for projects to become operational,” says Kaplan. “A national renewable energy standard or federal energy policy legislation along with a streamlined transmission siting and cost allocation process are the essential ingredients to building a robust future U.S. wind market.”

On the supply front, the sudden drop in turbine demand and a heightened level of competition has created a buyer’s market for the foreseeable future.

“Turbine manufacturers and their suppliers will increasingly look to differentiate themselves based on cost, product, services and track record,” says Kaplan.

For instance, last month GE (NYSE:GE) introduced a full service agreement (FSA) designed to provide wind turbine owners with total support for all planned and unplanned maintenance and operations needs.

Meanwhile, Siemens (SI) is leading the push into next-generation wind turbine designs using direct drive technology.

The U.S. supply chain continues to expand domestically, supported by strong prospects for future wind growth. The surge in U.S. wind installations over the past three years has encouraged established European players and new entrants from Asia to enter the U.S. market, ensuring a steady supply of turbines to the U.S. market for the foreseeable future.

Some of the companies building new manufacturing plants in teh US include Alstom (OTCPK:AOMFF), Mitsubishi Heavy (OTCPK:MHVYF), and A-Power Energy (OTC:APWR).

Disclosure: No positions