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New Study Reveals Challenges and Opportunities in U.S. Wind Power Market

Despite challenges, wind turbine manufacturers continue to localize production domestically, while the cost of wind energy is facing downward pressure.

July 12, 2011
Allan Chen (510)486-4210  A_Chen@lbl.gov
News Release

Ryan Wiser (510)486-5474 RHWiser@lbl.gov (technical contact)
Mark Bolinger (603)795-4937 MABolinger@lbl.gov (technical contact)

Despite a trying year in which wind power capacity additions declined significantly compared to both 2008 and 2009, the U.S. remained one of the fastest-growing wind power markets in the world in 2010—second only to China—according to a report released today by the U.S. Department of Energy and prepared by Lawrence Berkeley National Laboratory (Berkeley Lab).

“The delayed impact of the global financial crisis, relatively low natural gas and wholesale electricity prices, and slumping overall demand for energy combined to slow demand for new wind power installations in 2010,” says Ryan Wiser, one of the authors of the study and a scientist at Berkeley Lab. As a result, roughly 5 GW of new wind power capacity were connected to the U.S. grid in 2010, compared to nearly 10 GW in 2009 and more than 8 GW in 2008.

2011-wind-coverWind power comprised 25 percent of new U.S. electric capacity additions in 2010 and represented $11 billion in new investment. Wind power contributes more than 10 percent of total electricity generation in four states, and provides more than 2 percent of total U.S. electricity supply.

The 2010 edition of the DOE’s “Wind Technologies Market Report” provides a comprehensive overview of developments in the rapidly evolving U.S. wind power market. Some of the key findings include:

Due to the size and promise of the U.S. market, wind turbine manufacturers continued to localize production domestically in 2010, despite the relatively slow year. “Nine of the 11 wind turbine manufacturers with the largest share of the U.S. market in 2010 now have one or more manufacturing facilities in the United States, compared to just one such manufacturer with a domestic presence as recently as 2004,” says Mark Bolinger, a co-author of the study and a Berkeley Lab scientist. In a major shift, the growth in U.S. wind turbine manufacturing capability, combined with the drop in wind power plant installations, led to an estimated over-capacity of U.S. turbine nacelle assembly capability of roughly 2.5 GW in 2010, in comparison to 4 GW of under-capacity in 2009.

As a result, a growing percentage of the equipment used in U.S. wind power projects is domestically manufactured. U.S. trade data show that the United States remained a large importer of wind power equipment in 2010, but that wind power capacity growth has outpaced the growth in imports in recent years. When presented as a fraction of total equipment-related wind turbine costs, imports have declined significantly from 65 percent in 2005-2006 to roughly 40 percent in 2009-2010.

Wind turbine prices have declined substantially since 2008. Price quotes for recent wind turbine transactions are in the range of $900-$1,400/kW, suggesting price declines of as much as 33 percent or more since late 2008, with an average decline closer to 20 percent for orders announced in 2010.

Technological advancements have improved wind turbine performance, particularly at lower wind speed sites. Since 1998-1999, the average nameplate capacity of wind turbines installed in the U.S. has increased by 151 percent (to 1.8 MW in 2010), the average turbine hub height has increased by 43 percent (to 80 meters), and the average rotor diameter has increased by 76 percent (to 84 meters). This significant upscaling has increased the performance of wind projects. Substantial curtailment of wind energy output has occurred in some regions, however, while a variety of factors have resulted in a move by wind developers towards lower wind speed sites.
wind-stock
Turbine price reductions, coupled with improved turbine technology, are expected to exert downward pressure on total project costs and wind power prices over time. Wind power cost and price reductions were not evident for projects installed in 2010, on average, as costs were driven by turbines ordered at higher prices in previous years. Early indications from projects built most recently, however, show the promise of substantial cost and price reductions, thereby improving the competitive position of wind energy as compared to the recent past.

Looking ahead, projections are for modest growth in 2011 and 2012. Lower wind turbine and wind power pricing, along with key federal incentives for wind energy that are in place through 2012, are expected to lead to modest growth in annual wind power capacity additions in 2011 relative to 2010, with an even better year predicted in 2012. Capacity growth is expected to remain below the 2009 high, however, due in part to relatively low wholesale electricity prices and limited need for new electric capacity additions. Forecasts for 2013, meanwhile, are highly uncertain and depend in part on assumptions about the possible extension of federal incentives beyond 2012.

Berkeley Lab’s contributions to this report were funded by the Wind & Water Power Program, Office of Energy Efficiency and Renewable Energy of the U.S. Department of Energy.

Lawrence Berkeley National Laboratory addresses the world’s most urgent scientific challenges by advancing sustainable energy, protecting human health, creating new materials, and revealing the origin and fate of the universe. Founded in 1931, Berkeley Lab’s scientific expertise has been recognized with 12 Nobel prizes. The University of California manages Berkeley Lab for the U.S. Department of Energy’s Office of Science. For more, visit www.lbl.gov.

Additional Information:

The full report (“2010 Wind Technologies Market Report”), a presentation slide deck that summarizes the report, and an Excel workbook that contains much of the data underlying the report, can all be downloaded here.

The Department of Energy’s Progress Alert is available here.


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