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Program Name or Ancillary Text eere.energy.gov

WIND AND WATER POWER PROGRAM

1

2012 Wind Technologies Market Report

Ryan Wiser and Mark Bolinger

Lawrence Berkeley National Laboratory

Report Summary

August 2013


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2012 Wind Technologies Market Report Purpose, Scope, and Data:

• Publicly available annual report summarizing key trends in the U.S. wind power market, with a focus on 2012

• Scope primarily includes wind turbines over 100 kW in size

• Separate DOE-funded annual reports on distributed and offshore wind

• Data sources include AWEA, EIA, FERC, SEC, etc. (see full report)

Report Authors: • Primary authors: Ryan Wiser and Mark Bolinger, Berkeley Lab

• Contributions from others at Berkeley Lab, Exeter Associates, NREL

Funded by: U.S. DOE Wind & Water Power Technologies Office

Available at: http://www1.eere.energy.gov/wind/


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Report Contents • Installation trends • Industry trends • Cost trends • Performance trends • Wind power price trends • Policy and market drivers • Future outlook


4

New to the Current Edition of the Report • Somewhat expanded analysis of wind turbine equipment

imports & exports as well as operations & maintenance costs

• Summary of trends in wind project capacity factors by turbine design and estimated wind resource conditions

• Further emphasis on full-term power purchase agreement prices levelized over the contract term

• Reporting certain data based on revised regional definitions and boundaries


5

Key Findings • Wind has been a significant source of new generation in the U.S. • The supply chain is under duress, but domestic manufacturing

content remained strong in 2012 • Turbine scaling is boosting wind project capacity factors, while the

installed cost of wind is on the decline • Trends are enabling very aggressive wind power pricing and solid

economics in many regions despite low natural gas prices • It will take time to re-build the project pipeline, ensuring a slow

year for new additions in 2013, and then solid growth in 2014 • Medium to longer term growth remains uncertain, dictated in part

by future natural gas prices as well as state and federal policy decisions, though recent declines in the price of wind energy help boost the prospects for future growth


6

Installation Trends


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• 13.1 GW of wind added in 2012, more than 90% higher than 2011 • $25 billion invested in wind power project additions • Cumulative wind power capacity up by 28%, bringing total to 60 GW

Wind Power Additions Hit a New Record in 2012, in Part Driven By the Then-Planned Expiration of Federal Tax Incentives

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2012

Annual U.S. Capacity (left scale)

Cumulative U.S. Capacity (right scale)

Cum

ulat

ive

Cap

acity

(GW

)

Ann

ual C

apac

ity (G

W)


8

Wind Power Was the Largest Source of U.S. Generating Capacity Additions in 2012

• Wind was, for the first time, the largest resource added in terms of gross capacity, despite persistently low natural gas prices

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Tota

l Ann

ual

Cap

acity

Add

ition

s (G

W)

Wind Other Renewable GasCoal Other Non-Renewable Wind (% of Total)

Win

d Ca

paci

ty A

dditi

ons

(% o

f Tot

al A

nnua

l Cap

acity

Add

ition

s)


• U.S. led global growth in wind capacity in 2012; expected to lead global contraction in wind capacity additions in 2013

• Remains a distant second to China in cumulative capacity

The U.S. Narrowly Regained the Lead in Global Annual Wind Power Additions

9

Annual Capacity (2012, MW)

Cumulative Capacity (end of 2012, MW)

U.S. 13,131 China 75,372 China 12,960 U.S. 60,005 Germany 2,415 Germany 31,467 India 2,336 Spain 22,462 U.K. 1,958 India 18,602 Italy 1,272 U.K. 9,113 Spain 1,112 Italy 7,998 Brazil 1,077 France 7,593 Canada 936 Canada 6,214 Romania 923 Portugal 4,363 Rest of World 6,838 Rest of World 42,368 TOTAL 44,958 TOTAL 285,558


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U.S. Lagging Other Countries in Wind As a Percentage of Electricity Consumption

Note: Figure only includes the countries with the most installed wind power capacity at the end of 2012


11

Geographic Spread of Wind Power Projects in the United States Is Reasonably Broad

Note: Numbers within states represent cumulative installed wind capacity and, in brackets, annual additions in 2012.


12

Texas Added the Most Wind Capacity in 2012; 9 States Exceed 12% Wind Energy

At end of 2012: • Texas had more

than twice as much wind capacity as any other state

• 22 states had >500 MW of capacity (15 > 1 GW, 10 > 2 GW)

• 3 states had the ability to provide >20% of total in-state generation from wind (9 > 10%, 17 > 5%)


13

No Commercial Offshore Turbines Commissioned in the U.S., but 10 Projects Totaling 2.8 GW Are Somewhat More Advanced in Development

• Two projects have power purchase agreements (PPAs):

• Cape Wind (MA)

• Deepwater Wind (RI)

• PPA terms for Statoil project in ME approved by state regulators

• Scale model of floating turbine deployed in ME in June 2013

• MD established offshore wind set-aside within state’s RPS


14

Interconnection Queues Demonstrate that An Enormous Amount of Wind Is Under Consideration but that Relative Interest in Wind May Be Declining

Wind represented ~37% of capacity in sampled 42 queues

But… absolute amount of wind (and coal & nuclear) in sampled queues has declined in recent years whereas natural gas and solar capacity has increased

Not all of this capacity will be built….


15

95% of Wind Capacity Planned for Texas, Northwest, Southwest Power Pool, PJM, Midwest, Mountain Region, and California

Not all of this capacity will be built….

0

5

10

15

20

25

ERCOT Northwest SPP PJM MISO /Midwest

Mountain California New YorkISO

ISO-NewEngland

Southeast

Nam

epla

te W

ind

Pow

er C

apac

ity (G

W)

Entered queue in 2012 Total in queue at end of 2012


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Industry Trends


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“Big 3” OEMs Captured >70% of U.S. Market in 2012, yet Diversification Continues

• 25 OEMs installed > 1 MW of turbines in the U.S. in 2012, compared to just 5 in 2005; some recapture of market share by “big 3” OEMs since 2008-09

• 2012 installations by Chinese and South Korean manufacturers included: Goldwind, China Creative, Guodian, Sinovel, Hyundai, HZ, Sany

• Globally, GE ascended to an effective tie with Vestas as the top supplier

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100%

2005 2006 2007 2008 2009 2010 2011 2012

Other

Suzlon

Acciona

Clipper

Nordex

Mitsubishi

REpower

Gamesa

Vestas

Siemens

GE Wind

Turb

ine

Man

ufac

ture

r U.S

. Mar

ket S

hare


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Manufacturing Supply Chain Responded to Record Year in Wind Additions, but with Substantial Growing Pains

Note: map is not intended to be exhaustive

• Manufacturers met the challenge of supplying 13 GW in 2012, but the late extension of PTC found some with already reduced workforces or closed facilities in preparation for lower demand

• 7 of 10 turbine OEMs with largest share of U.S. market in 2012 had manufacturing facilities in the U.S. in 2012, compared to one OEM in 2004

• Small number of manufacturing facilities opened in 2012, with a larger number of facilities closing (including Clipper & Nordic)


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• Manufacturers have now begun receiving orders for 2013 and 2014, but it is not yet clear to what degree these orders will lead to a recovery of the sector

Over-Capacity of U.S. Nacelle Assembly Capability in Short Term Given Reduced Near-Term Deployment Expectations

• Near term forecasts for wind additions suggest an over-capacity of nacelle assembly capability in the short term, in contrast to 4 GW of under-capacity in 2009 and 1 GW of under-capacity in 2012

• 80,700 full time workers employed directly or indirectly in industry at end of 2012, but declines in manufacturing jobs

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2006 2007 2008 2009 2010 2011 2012 2013e 2014e

Win

d Tu

rbin

e N

acel

le A

ssem

bly

Cap

acity

in th

e U

.S. (

and

Win

d Tu

rbin

e In

stal

latio

ns) (

GW

)

Other

Nordex

Acciona

Siemens

Vestas

GE

U.S. TurbineInstallations


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Growth in Both Wind-Related Equipment Imports and Exports in 2012

• Figure only includes selected trade categories; may miss other wind-related imports • See full report for the many assumptions used to generate this figure

0

1

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7

20062453 MW

20075253 MW

20088362 MW

200910005 MW

20105220 MW

20116819 MW

201213131 MW

Bill

ion

2012

$US

Gearboxes * (2012)Wind generators (2012)Wind blades and hubs (2012)Other wind-related equipment *Towers *Wind-Powered Generating Sets

US Imports:Exports of Wind-Powered Generating Sets

* estimated imports

Overall, the U.S. is a net importer of wind equipment Exports of wind-powered generating sets from the U.S. rose from $16 million in 2007 to $388 million in 2012 (almost entirely to Canada and Latin America)


21

Source Markets for Imports Vary Over Time, and By Type of Wind Equipment

• Considering total 2012 imports in these trade categories, almost half of import value comes from Asia, one-third from Europe, and significant amounts from Americas

• Majority of wind-powered generating sets from Europe

• Majority of tower imports from Asia; less from North America

• Most imports of blades & hubs from Brazil, China, and Denmark; diverse mix

• Under half of generators & parts imported from Asia; remainder Europe & North America


22

Despite Challenges, a Growing Percentage of the Equipment Used in U.S. Wind Projects Has Been Sourced Domestically

• If imports do not occur through other HTS codes, domestic content increased from: ~25% in 2006-07 to ~70% in 2012; whether these trends will be maintained in future years is highly uncertain

Figure may understate the wind industry’s reliance on imports because wind-related imports can occur under other trade categories not captured here

See full report for the many assumptions used to generate this figure

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2006-2007 2008-2009 2010-2011 2012*

Sel

ecte

d Im

port

Con

tent

as

Frac

tion

of T

urbi

ne C

ost

Billi

on 2

012$

US

Average Annual Turbine Equipment Cost (Calendar Year)Value of Selected Imports (Customs value, 4 month lag, Sept - Aug * )Selected Import Content

50%

40%

0%

30%

60%

70%

10%

20%

* For 2012, the import period is from September 2011 through November 2012.

80%

90%

100%


Average Capacity of Turbines Declined Slightly, but Average Hub Height and Rotor Diameter Continued to Increase

• Two periods of rapid scaling: 1998-2006 and 2009-present • 2007-2008 mostly stagnant, as OEMs focused on meeting demand

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100

1998-99 2000-01 2002-03 2004-05 2006 2007 2008 2009 2010 2011 2012

Commercial Operation Year

Average Nameplate Capacity (right scale)

Average Rotor Diameter (left scale)

Average Tower Height (left scale)

Met

ers

MW

23


Pace of Scaling Has Slowed Since 2006

• 6 years (2000-2005) for MW-class turbines to displace sub-MW-class • Another 7 years (2006-2012) for multi-MW-class turbines (2 MW and

above) just to gain nearly equal market share with MW-class 24

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1998-991,4291,027

2000-011,9841,761

2002-031,6852,075

2004-051,9002,769

20061,5302,453

20073,1995,253

20085,0158,361

20095,744

10,002

20102,9165,215

20113,4696,819

20126,753

13,131

Size

Dis

trib

utio

n (%

of t

urbi

nes d

eplo

yed)

>0.1 MW & <1 MW

≥1 MW & <2 MW

≥2 MW & <3 MW

≥3 MW

Year:Turbines:

MW:


25

The Project Finance Environment Held Steady in 2012 • Uncertainty surrounding the fate of the PTC in 2013 led to lower

commitments of both tax equity and debt in 2012 ‒ Yields in both markets, however, remained largely unchanged from 2011

• In the debt market, a seemingly permanent shift to shorter bank loan tenors has created an opportunity for institutional lenders and bond markets that can offer longer-maturity instruments ‒ Some developers are tapping into hybrid bank/bond instruments that play to

the strengths of both types of debt in offering what, from the developer’s perspective, appears to be a synthetic, fully amortizing long-term loan

• Next test of the depth of the tax equity market likely to be in 2014 ‒ Tax equity’s reluctance to commit to projects more than 12 months in advance

of commercial operations effectively turns the end-of-2013 PTC construction start deadline into an end-of-2014 commercial operations deadline

‒ Section 1603 cash grant now a thing of the past for wind, while the backlog of grandfathered solar projects with 1603 grants will have diminished somewhat by 2014, bringing renewed competition for tax equity


26

IPPs Remain the Dominant Owners of Wind Projects; Utilities Took a Breather in 2012

Utility ownership fell to 10% in 2012, down from 25% in 2011

0%

10%

20%

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40%

50%

60%

70%

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90%

100%

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90%

100%

1998

1999

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2007

2008

2009

2010

2011

2012

Other

Publicly Owned Utility (POU)

Investor-Owned Utility (IOU)

Independent Power Producer (IPP)

% o

f Cum

ulat

ive

Inst

alle

d C

apac

ity

Other:228 MW (2%)

IPP: 11,556 MW (88%)

IOU:1,128 MW (9%)

POU:219 MW (2%)

2012 Capacity byOwner Type


27

Long-Term Contracted Sales to Utilities Are the Most Common Off-Take Arrangement, and Have Gained Ground since the Peak of Merchant Development in 2008/2009

0%

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90%

100%

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90%

100%

1998

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2011

2012

On-Site Merchant/Quasi-Merchant Power Marketer POU IOU%

of C

umul

ativ

e In

stal

led

Cap

acity

Merchant:2,475 MW

(19%)

On-Site:94 MW (0.7%)

IOU:7,448 MW

(57%)

POU:2,957 MW

(23%)

Marketer:157 MW (1.2%)

2012 Capacity byOff-Take Category


28

Cost Trends


29

Wind Turbine Prices Remained Well Below the Levels Seen Several Years Ago

• Recent turbine orders reportedly in the range of $950-1,300/kW, with more-favorable terms for buyers and improved technology

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13

Announcement Date

U.S. Orders <5 MW

U.S. Orders from 5 - 100 MW

U.S. Orders >100 MW

Vestas Global Average

Polynomial Trend Line for Orders

Turb

ine

Tran

sact

ion

Pric

e (2

012$

/kW

)

Recently reported global

average prices

Figure depicts reported transaction prices from 102 U.S. wind turbine orders totaling 27 GW


30

Reported Installed Project Costs Continued to Trend Lower in 2012

0

1,000

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6,000

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2012

Inst

alle

d Pr

ojec

t Cos

t (20

12 $

/kW

)

Commercial Operation Date

Individual Project Cost (689 projects totaling 49,414 MW) Capacity-Weighted Average Project Cost

Whereas turbine prices peaked in 2008/2009, project-level installed costs peaked in 2009/2010, reflecting the normal passage of time between when a turbine supply agreement is signed and when those turbines are actually installed

In 2012, the average cost was ~$1,940/kW, down ~$200/kW from 2011, and down $300/kW from the peak in 2009-10


31

Economies of Scale Evident, Especially at Lower End of Project Size Range

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

≤5 MW71 MW

34 projects

5-20 MW129 MW

10 projects

20-50 MW584 MW

17 projects

50-100 MW1,191 MW15 projects

100-200 MW3,717 MW28 projects

>200 MW3,723 MW14 projects

Inst

alle

d Pr

ojec

t Cos

t (20

12 $

/kW

) Capacity-Weighted Average Project Cost

Individual Project Cost

Sample includes projects built in 2012


32

Economies of Scale Also Evident By Turbine Size

• Theory: A project may be built less-expensively using fewer larger turbines instead of a larger number of smaller turbines

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

>0.1 & <1 MW10 MW

9 projects

≥1 & <2 MW4,136 MW51 projects

≥2 & <3 MW4,515 MW49 projects

≥3 MW752 MW

9 projects

Inst

alle

d Pr

ojec

t Cos

t (20

12 $

/kW

)

Capacity-Weighted Average Project Cost

Individual Project Cost



33

Regional Definitions Based on Combination of Geography and Wind Resource

InteriorGreatLakes

West

Southeast

Northeast


34

Some Regional Differences in Average Wind Power Project Costs Are Apparent

Different permitting/development costs may play a role at both ends of spectrum: it’s easier/cheaper to build in the US interior and harder/more expensive along the coasts

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Interior42 projects3,827 MW

Northeast29 projects1,101 MW

Great Lakes21 projects1,529 MW

West25 projects2,938 MW

Southeast1 project19 MW

Inst

alle

d Pr

ojec

t Cos

t (20

12 $

/kW

)

Capacity-Weighted Average Project Cost Individual Project Cost Capacity-Weighted Average Cost, Total U.S.



35

Operations and Maintenance Costs Varied By Project Age and Commercial Operations Date

Capacity-weighted average 2000-12 O&M costs for projects built in the 1980s equal $34/MWh, dropping to $23/MWh for projects built in 1990s, and to $10/MWh for projects built since 2000 Note: Sample is limited, and consists of 138 wind power projects totaling 9,022 MW; few projects in sample have complete records of O&M costs from 2000-12; O&M costs reported here DO NOT include all operating costs


36

Operations and Maintenance Costs Varied By Project Age and Commercial Operations Date

Note: Sample size is extremely limited

Data are consistent with a recent NREL analysis based on data from GL Garrad Hassan covering the first two years of operations for > 3 GW of wind: that analysis suggests that turbine O&M costs may have increased among more recent (post-2008) projects

O&M reported in figure does not include all operating costs: Statements from public companies with large U.S. wind asset bases report total operating costs in 2012 for projects built in the 2000s of ~$24/MWh


37

Performance Trends


Trends in Sample-Wide Capacity Factors Were Impacted by Curtailment and Inter-Year Wind Resource Variability

The wind resource index is compiled from NextEra Energy Resources reports. The pre-2007 portion of the index is adjusted to approximate the conversion from wind speed to generation (this adjustment is unnecessary starting in 2007). 38

0.00

0.15

0.30

0.45

0.60

0.75

0.90

1.05

1.20

0%

5%

10%

15%

20%

25%

30%

35%

40%

200010

591

200130

943

200273

2,682

200384

3,128

2004106

4,500

2005129

5,142

2006153

7,967

2007196

9,951

2008240

14,926

2009339

23,617

2010452

33,381

2011516

38,561

2012446

42,844

Long-Term W

ind Resource IndexSa

mpl

e-W

ide

Capa

city

Fac

tor

Capacity Factor Based on Estimated Generation (if no curtailment in subset of regions)

Capacity Factor Based on Actual Generation (with curtailment)

Wind Resource Index (right scale)

# MW:# Projects:

Year:


39

Wind Curtailment Is Substantial, but Appears to Have Declined in 2012

In areas where curtailment has been particularly problematic in the past – principally in Texas – steps taken to address the issue have started to bear fruit

Estimated Wind Curtailment (GWh and % of potential wind generation)

• ERCOT numbers represent both forced (non-market) and voluntary (market) curtailment

• All other regions show only forced curtailment

2007 2008 2009 2010 2011 2012 Electric Reliability Council of Texas (ERCOT)

109.1 (1.2%)

1,416.6 (8.4%)

3,872.2 (17.1%)

2,066.5 (7.7%)

2,621.5 (8.5%)

1,038.0 (3.7%)

Southwestern Public Service Company (SPS) N/A 0

(0.0%) 0

(0.0%) 0.9

(0.0%) 0.5

(0.0%) N/A**

Public Service Company of Colorado (PSCo) N/A 2.5

(0.1%) 19.0

(0.6%) 81.5

(2.2%) 63.9

(1.4%) N/A**

Northern States Power Company (NSP) N/A 25.4

(0.9%) 42.4

(1.7%) 44.3

(1.7%) 58.7

(1.6%) 120.5 (3.1%)

Midcontinent Independent System Operator (MISO) less NSP N/A N/A 249.6

(2.0%) 779.7 (4.2%)

782.6 (3.4%)

726.2 (2.5%)

Bonneville Power Administration (BPA) N/A N/A N/A 4.6*

(0.1%) 128.7* (1.4%)

70.8* (0.7%)

PJM N/A N/A N/A N/A N/A 111.6# (1.8%)#

Total Across These Seven Areas: 109 (1.2%)

1,444 (5.7%)

4,183 (9.7%)

2,978 (4.9%)

3,656 (4.9%)

2,067 (2.7%)

*A portion of BPA’s curtailment is estimated assuming that each curtailment event lasts for half of the maximum possible hour for each event. #2012 curtailment numbers for PJM are for June through December only (data for January through May are not available). **Xcel Energy declined to provide 2012 curtailment data for its SPS and PSCo service territories.


40

Even Controlling for These Factors, Average Capacity Factors for Projects Built After 2005 Have Been Stagnant

Sample-wide average not strongly trending higher with more-recent vintages as might be expected based on rotor and hub height scaling trends: does not incorporate 2012 scaling and does not control for wind resource quality

0%

10%

20%

30%

40%

50%

60%

1998-9923

776

2000-0124

1,514

2002-0336

1,908

2004-0527

3,417

200620

1,640

200734

4,931

200876

8,513

200995

9,561

201048

4,731

201163

5,854

Generation-Weighted Average (by project vintage) Individual Project (by project vintage)

2012

Cap

acity

Fac

tor (

by p

roje

ct v

inta

ge)

Sample includes 446 projects totaling 42.8 GW

Vintage:# projects:

# MW:


Despite Turbine Design Changes that Would Otherwise Boost Capacity Factors, Project Build-Out in Lower-Quality Wind Resource Areas Push the Other Way

All else equal: • Growth in rotor

swept area relative to turbine capacity (drop in specific power) will boost capacity factor

• Building projects in lower wind resource sites will hurt capacity factor

41

275

305

335

365

395

425

75

80

85

90

95

100

1998-99 2000-01 2002-03 2004-05 2006 2007 2008 2009 2010 2011 2012Commercial Operation Date

Average 80m Wind Resource Quality Among Built Projects (left scale)

Average Specific Power Among Built Projects (right scale)

Inde

x of

Win

d Re

sour

ce Q

ualit

y at

80m

(199

8-99

=100

)

Spec

ific

Pow

er (W

/m^2

)


Controlling for Wind Resource Quality Demonstrates Impact of Turbine Evolution

• Notwithstanding build-out of lower-quality wind resource sites, turbine design changes are driving capacity factors higher for projects located in fixed wind resource regimes

• Still too early for GE 1.6/100 turbines to be reflected in empirical capacity factor data: expect a much larger increase in years ahead

Wind Resource Quality is based on AWS Truepower site estimate of gross capacity factor at 80 m: • Lower = 30%-40% • Medium = 40%-50% • Higher = > 50%

42

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Lower(138 projects, 11.1 GW)

Medium(229 projects, 25 GW)

Higher(88 projects, 6 GW)

Wind Resource Quality

Specific Power Range of 200-300 (45 projects & 5,048 MW)



455 projects totaling 42.1 GW with commercial operation date of 1998-2011

Net

Cap

acity

Fac

tor (

in 2

011

and/

or 2

012)


43

Regional Variations in Capacity Factor Reflect the Strength of the Wind Resource

0%

10%

20%

30%

40%

50%

60%

Southeast4 projects308 MW

Northeast6 projects289 MW

West37 projects2,452 MW

Great Lakes15 projects2,077 MW


Generation-Weighted Average (by region)

Generation-Weighted Average (total U.S.)

Individual Project (by region)

2012

Cap

acity

Fac

tor

Sample includes 110 projects built in 2010 or 2011 and totaling 10.6 GW


44

Wind Power Price Trends


45

Sample of Wind Power Prices • Berkeley Lab collects data on historical wind power sales

prices, and long-term PPA prices

• PPA sample includes 302 contracts from projects built from 1998-2012, totaling 24,626 MW (42% of all wind capacity added in that period, and 70% of all capacity added that is sold under bundled PPAs)

• Prices reflect the bundled price of electricity and RECs as sold by the project owner under a power purchase agreement – Dataset excludes merchant plants and projects that sell renewable

energy certificates (RECs) separately

– Prices reflect receipt of state and federal incentives (e.g., the PTC or Treasury grant), as well as various local policy and market influences; as a result, prices do not reflect wind energy generation costs


Wind PPA Prices Generally Have Been Falling Since 2009 and Now Rival Previous Lows Set a Decade Ago

(this despite the trend to lower-quality wind resource sites)

46

$0

$20

$40

$60

$80

$100

$120

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

PPA Execution Date

Interior (14,802 MW, 173 contracts) West (6,835 MW, 68 contracts) Great Lakes (2,356 MW, 33 contracts) Northeast (855 MW, 20 contracts) Southeast (268 MW, 6 contracts)

Leve

lized

PPA

Pri

ce (2

012

$/M

Wh)

75 MW

150 MW


A Smoother Look at the Time Trend Shows Steep Recent Decline in Pricing; Especially Low Pricing in Interior Region

47

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

1996-9910

553

2000-0117

1,249

2002-0324

1,382

2004-0530

2,190

200630

2,311

200726

1,781

200839

3,465

200947

3,982

201040

3,999

201134

3,533

20128

630

Ave

rage

Lev

eliz

ed P

PA P

rice

(Rea

l 201

2 $/

MW

h)

Nationwide Interior

Great Lakes West

Northeast

PPA Year:Contracts:

MW:


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Low Wholesale Electricity Prices Continued to Challenge the Relative Economics of Wind Power

• Wholesale price range reflects flat block of power across 23 pricing nodes across the U.S. • Recent wholesale prices reflect low natural gas prices, driven by weak economy and shale gas • Price comparison shown here is far from perfect – see full report for caveats

0

10

20

30

40

50

60

70

80

90

100

20039

570

200413

547

200517

1,643

200630

2,311

200726

1,781

200839

3,465

200947

3,982

201040

3,999

201134

3,533

20128

630

2012

$/M

Wh

Nationwide Wholesale Power Price Range (by calendar year)

Generation-Weighted Average Levelized Wind PPA Price (by year of PPA execution)

Wind project sample includes projects with PPAs signed from 2003-2012

PPA year:Contracts:

MW:


49

Gap Between Wholesale Prices and Wind PPA Prices Varied by Region in 2012

Notes: Within a region there are a range of wholesale prices because multiple price hubs exist in each area; price comparison shown here is far from perfect – see full report for caveats 0

10

20

30

40

50

60

70

80

90

100


Great Lakes4 projects219 MW

Northeast3 projects210 MW

West7 projects766 MW

Total US42 projects4,163 MW

Average 2012 Wholesale Power Price Range

Individual Project Levelized Wind PPA Price

Generation-Weighted Average Levelized Wind PPA Price

Wind project sample includes projects with PPAs signed in 2011 or 2012

2012

$/M

Wh

Wind PPA prices were most competitive with wholesale prices in the Interior region (where PPAs signed in 2011/2012 generally ranged from $20-40/MWh) and were least competitive in the West (with a PPA price range in 2011/2012 of under $50/MWh to over $90/MWh), with the Great Lakes and Northeast regions falling in between (with a PPA price range of roughly $50-70/MWh in 2011/2012)


50

Renewable Energy Certificate (REC) Prices Rose in Northeast, Remained Depressed Elsewhere

REC prices vary by: market type (compliance vs. voluntary); geographic region; specific design of state RPS policies

$0

$5

$10

$15

$20

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l- 12

Jan-

13

Low-Price REC Markets

DC Tier 1 MD Tier 1OH Out-of -State PA Tier 1TX Voluntary Wind (National)Voluntary Wind (West)

$0

$20

$40

$60

$80

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13

High-Price REC Markets

CT Class I DE Class I IL WindMA Class I ME New NH Class INJ Class I OH In-State RI New

2012

$/M

Wh


51

Policy and Market Drivers


52

Short-Term Extension of Federal Incentives for Wind Helps Restart Domestic Market • Wind projects that begin construction before the end of 2013 are eligible to

receive the PTC or ITC • First-year “bonus depreciation” at 50% for projects built in 2013 • Treasury cash grant program available for projects that were under

construction by the end of 2011 and placed in service by the end of 2012 42% of the new wind capacity installed in 2012 elected the cash grant, a drop

from 62% of the capacity installed in 2011, 82% in 2010, and 66% in 2009 • Section 1705 loan guarantee has wound down: program closed on loan

guarantees to 1,024 MW of wind, 739 MW of which came online in 2012 • Little action on what are among the wind industry’s two highest priorities – a

longer-term extension of federal tax (or cash) incentives and passage of a federal renewable or clean energy portfolio standard – but the near-term extension of the PTC/ITC has helped restart the domestic wind market, and should enable moderate growth in capacity additions at least through 2014


53

State Policies Help Direct the Location and Amount of Wind Development, but Current Policies Cannot Support Continued Growth at Recent Levels

• 29 states and D.C. have mandatory RPS

• State RPS’ can support ~3-5 GW/yr of renewable additions on average from 2013-2020 (less for wind specifically)


54

Solid Progress on Overcoming Transmission Barriers Continued • 2,300 circuit miles of new transmission built per year, on average,

over the last 5 years; 18,700 circuit miles planned through 2015 • AWEA has identified near-term transmission projects that – if all

were completed – could carry almost 70 GW of wind capacity • FERC continued implementation of Order 1000, requiring public

utility transmission providers to improve planning processes and determine a cost allocation methodology for new transmission

• States, grid operators, regional organizations, and DOE continue to take proactive steps to encourage transmission investment to improve access to renewable resources

• Numerous transmission projects designed, in part, to support wind made further progress in development and/or construction in 2012; others faced set-backs

• Lack of transmission still a barrier to wind development in some regions (witness curtailment data shown earlier)

Presenter

Presentation Notes

RYAN/KEVIN TO UPDATE


55

System Operators Implementing Methods to Accommodate Increased Wind Energy

Notes: Because methods vary and a consistent set of operational impacts has not been included in each study, results from the different analyses of integration costs and balancing reserves are not fully comparable. There has been some recent literature questioning the methods used to estimate wind integration costs and the ability to explicitly disentangle those costs.

Integrating wind energy into power systems is manageable, but not free of additional costs


56

Studies Find that Greater Wind Penetration Requires Increased Balancing Reserves

• The estimated increase in balancing reserves rarely exceeds 15% in these studies • “Fast” markets (i.e., with shorter scheduling periods) can generally integrate wind

more easily, with less need for increased balancing reserves (see graph on right)


57

Future Outlook


58

2013 Expected to Be a Slow Year for Wind Additions as Pipeline Recharges; Growth in 2014, then Uncertainty in 2015 and Beyond Forecasts for Annual U.S. Wind Additions (MW) Source 2013 2014 2015

Bloomberg NEF (2013a, 2013c) 2,800 8,000 3,200 IHS EER (2013) 2,000 6,000 7,300 Navigant (2013) 5,000 9,000 3,500 MAKE Consulting (2013) 3,500 7,700 4,500 EIA (2013b) 3,600 10,100 na

• Though PTC/ITC now available for projects that initiate construction by the end of 2013, it will take time to recharge the project pipeline

• While many projects will aim to meet the “start construction” deadline, 2013 will be a slow year, lowering not only U.S. but global growth forecasts

• 2014 is expected to be a strong year as developers commission projects that began construction in 2013


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Current Low Prices for Wind Energy May Support Higher Growth in the Future, but Headwinds Include… • Lack of clarity about fate of federal tax incentives • Continued low natural gas and wholesale electricity prices • Modest electricity demand growth • Limited near-term demand from state RPS policies • Inadequate transmission infrastructure in some areas • Growing competition from solar in some regions Growth expectations in near term do not match what would be required to achieve 20% wind by 2030


60

U.S. Is on Early Trajectory that May Lead to 20% Wind Electricity; Projections for 2013-2015, However, Fall Short of Annual Growth Envisioned in 20% Report

0

35

70

105

140

175

210

245

280

315

0

2

4

6

8

10

12

14

16

18

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Deployment Path in 20% Wind Report (annual) Actual Wind Installations (annual) Deployment Path in 20% Wind Report (cumulative) Actual Wind Installations (cumulative)

Ann

ual C

apac

ity

(GW

)

range of annual projections

Cum

ulat

ive

Capa

city

(GW

)


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Conclusions • Wind has been a significant source of new generation in the U.S. • The supply chain is under duress, but domestic manufacturing

content remained strong in 2012 • Turbine scaling is boosting wind project capacity factors, while the

installed cost of wind is on the decline • Trends are enabling very aggressive wind power pricing and solid

economics in many regions despite low natural gas prices • It will take time to re-build the project pipeline, ensuring a slow

year for new additions in 2013, and then solid growth in 2014 • Medium to longer term growth remains uncertain, dictated in part

by future natural gas prices as well as state and federal policy decisions, though recent declines in the price of wind energy help boost the prospects for future growth


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For More Information... See full report for additional findings, a discussion of the sources of data used, etc.

• http://www1.eere.energy.gov/wind/

To contact the primary authors • Ryan Wiser, Lawrence Berkeley National Laboratory

510-486-5474, [email protected] • Mark Bolinger, Lawrence Berkeley National Laboratory

603-795-4937, [email protected]

Berkeley Lab’s contributions to this report were funded by the Wind & Water Power Technologies Office, Office of Energy Efficiency and Renewable Energy of the U.S. Department of Energy under Contract No. DE-AC02-05CH11231. The authors are solely responsible for any omissions or errors contained herein.

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