ClimateWire: Days of summit-level climate talks may be over -- U.S. official

ClimateWire: Days of summit-level climate talks may be over -- U.S. official

ClimateWire: Wind power developers see declining costs, but market forces, tax credit expiration dim growth prospects

The findings, published by Lawrence Berkeley National Laboratory and the National Renewable Energy Laboratory, show that it cost between 25 and 40 percent less to produce wind energy on a per-kilowatt-hour basis today than it did in 2002-2003. Those savings came as developers were able to better spread out capital costs, increase the size and scale of wind farms, and enjoy federal tax incentives.

But technology advances were also a major driver behind the wind sector's overall lower costs, especially as vendors brought new, taller turbine towers and longer rotor blades to market. Those two improvements alone allowed for many newer wind farms to produce significantly more electricity on a per-turbine basis.

"We really have seen a sizable scaling of the technology over the last few years," said Ryan Wiser, a staff scientist at Lawrence Berkeley who co-authored the analysis. "In particular, those technological improvements have benefited developers in some of the lower-quality wind areas," where wind power development would not have been feasible a decade ago.

In fact, the analysis found that the amount of U.S. land area with ideal siting conditions for wind power has increased by between 130 and 270 percent since 2002-2003 due to improvements in turbine technology. Similarly, land area that can produce wind power for less than 5 cents per kilowatt-hour -- a price that makes wind competitive with natural gas -- has increased by almost 50 percent over the same period.

"We're opening a lot of new ground in the U.S., so to speak, that wasn't available a decade ago," Wiser said.

The findings were generally welcomed by the wind industry, which experienced a 31 percent growth spurt in 2011, installing nearly 6,900 megawatts of new generation capacity during the year, according to the American Wind Energy Association.
Natural gas boom and expiring tax credits drive uncertainties

Ellen Carey, a spokeswoman for AWEA, attributed the lower domestic production costs for wind power to a number of factors, including an uptick in U.S.-based manufacturing of turbines, towers and other wind farm equipment.

In 2005, Carey said, only 25 percent of wind turbine components were manufactured in the United States. Today, that figure is up to 60 percent. That shift has allowed for a sizable reduction in transportation and logistics costs for wind power developers.

Plus, she said, a state-of-the-art wind turbine installed in 2012 produces 15 percent more electricity than models deployed during the 1990s. "For all of those reasons, wind is becoming much more affordable," she said.

But the analysis doesn't project a rosy picture for the entire wind energy sector, nor does it predict that wind energy will remain cost-competitive in the years to come.

Eric Lantz of NREL's Strategic Energy Analysis Center, who also contributed to the report, said the wind-energy sector faces a number uncertainties in the months to come, including continued drops in the price of natural gas and the pending expiration of the federal government's production tax credit (PTC), which translates into a roughly 3-cent-per-kilowatt-hour savings for utility-scale wind developers.

Lantz declined to comment on how the possible loss of the PTC, along with a reduction in other government incentives, might affect the industry's fortunes in 2012. Rather, he said a combination of market forces -- including reduced electricity demand to do the poor economy and sagging natural gas prices -- will provide the ultimate test for the industry's staying power.

"There's a lot of competitive pressures out there," said Lantz. "I wouldn't necessarily say it's going to result in lots of new [wind power] deployments due to a reduction in costs."

The analysis also notes ongoing pain within the turbine manufacturing sector, where a glut of supply and increased competition from Chinese turbine makers has led to a general decline in sales and stock values for established firms like Vestas Wind Systems and General Electric Co., the leading U.S. turbine manufacturer, with about 50 percent of all installed U.S. turbines as of 2010.

Difficult market forces have driven down Vestas' stock price by 90 percent since 2008, and the company has scaled back its 2015 profit margin expectation from 15 percent to the high single digits, in part due to expectations of a market crash in 2013 (Climate Wire, Jan. 13).

GE Energy officials have predicted slower sales volume in the United States without the PTC, but the company expects to offset some of those reductions with turbine installations in emerging markets such as Brazil and Canada.