Renewables: Finally going mainstream
Citing the need to displace the use of fossil fuels to reduce CO2 emissions and help lessen America’s dependence on imports, 24 states and the District of Columbia have enacted renewable portfolio standards (RPS) that require their regulated electric utilities to get an increasing share of their supplies from wind farms, solar cells, and biomass and geothermal plants. The standards currently in place call for development of more than 55,000 MW of renewable capacity by 2020. Nine other states have introduced RPS bills, and several of the 24 states that have imposed standards are considering moving up the deadline to meet them.
In December 2007, the U.S. Congress extended the federal production tax credit (PTC) for renewable energy plants by one year, through December 31, 2008. That was the second time Congress approved extension of the PTC just before it expired. From 1999 until 2004, the credit was allowed to expire on three separate occasions, and each time it put a damper on renewable energy development. The PTC provides a 1.9 cents/kWh tax credit for all electricity generated by a renewable-fuel plant over its first 10 years of operation—if the plant qualified by entering commercial service before the deadline.
With the RPS and PTC incentives in place, investment in renewable energy projects is expected to surpass that in gas-fired projects for the third year in a row. More than 5,000 MW of renewables-fueled plants valued at $7.7 billion broke ground in 2006. That’s a 67% increase over the prior year. For comparison, investment in new gas-fueled plants covering both years totaled $5.9 billion.
More than 5,200 MW of renewable-fueled units broke ground last year by September, and another 2,800 MW were scheduled to follow suit by year’s end. All told, 8,000 MW, representing more than $11.7 billion in investments, were expected to begin construction in 2007, while over 4,000 MW were scheduled to go commercial by New Year’s Eve.
Dwarfing those annual totals are the more than 82,000 MW of renewable energy projects being developed that have construction kickoffs between 2008 and 2012. Significantly, 87% of the planned capacity will be wind power, a generation niche in which the U.S. has long been far behind Europe.
Prospects for U.S. wind power have become brighter for two reasons: renewal of the PTC and the development of larger and more-efficient wind turbines. Thanks to the federal subsidy, wind farms at sites with favorable characteristics can now compete on price with fossil-fueled plants. Noticing that, investors pushed spending on wind power projects in 2007 to record levels.
Last year in the U.S., new wind farms totaling more than 4,000 MW were expected to come on-line. By September, 33 projects representing 3,635 MW had done so. Another 41 farms in 20 states, totaling 3,600 MW, were under construction; another 1,600 MW were in advanced planning for start-up this year. Even if some are delayed, bringing the total for 2007 and 2008 below the expected 8,800 MW, new wind capacity still will represent a significant increase over the 4,873 MW total for 2005 and 2006.
Aside from the need for new or upgraded transmission to link remote wind capacity to the grid, the rising costs and tighter supply of wind turbines remain the technology’s biggest obstacles. Neither situation is likely to improve for some time. For example, most of the turbines that will roll off the assembly line this year have already been purchased.
The worldwide equipment shortage has spurred most of the leading wind turbine manufacturers to boost supplies destined for use in the U.S., where demand is set to peak:
- Since 2001, Spain’s Gamesa has built two state-of-the-art turbine factories in Pennsylvania.
- In 2005, homegrown Clipper Windpower expanded the annual capacity of its factory in Cedar Rapids, Iowa, from five turbines to 150.
- Last year, Siemens Power Generation’s new plant in Fort Madison, Iowa, shipped its first wind turbine blade; Acciona Windpower opened a new factory in the same state; Suzlon Rotor Corp. inaugurated a wind blade nose cone manufacturing plant in Pipestone, Minn.; and Molded Fiberglass Companies broke ground on a factory in Aberdeen, South Dakota, that will build blades for 1.5-MW turbines designed and assembled by GE Energy.
- This year, Vestas Wind plans to open a turbine blade factory in Windsor, Colo. Meanwhile, in Newton, Iowa (where the legendary Maytag washer/dryer factory is scheduled to close by year’s end), TPI Composites will begin manufacturing blades for GE’s 1.5-MW machines.
- Further out, TECO-Westinghouse and Composite Technology Corp. have agreed to build a plant in Round Rock, Texas, to make turbines for the latter’s subsidiary, DeWind Inc. Separately, Hendricks Industries plans to open a big, $34 million wind turbine tower manufacturing plant in Keokuk, Iowa, creating 350 jobs.
The top three general contractors, which together are building more than 80% of the wind farms under construction, are M.A. Mortenson, D.H. Blattner & Sons, and RES American Construction.
—Britt Burt is VP of Power Industry Research and Shane Mullins is VP of Product Development for the electric power industry at Industrial Info Resources. The company provides comprehensive market intelligence about industrial processing, heavy manufacturing, and electric power generation. For more information on IIR’s products, call 800-762-3361 or visit www.industrialinfo.com.
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